Chapter 9, Problem 3PA

Shirley’s Beauty Store records sales and purchase transactions in the general journal. In addition to a general ledger, Shirley’s Beauty Store also uses an accounts receivable ledger and an accounts payable ledger. Transactions for January related to the sales and purchase of merchandise are as follows:

Jan. 3    Bought 30 Mango Bath and Shower Gels from Madden, Inc., $660, invoice no. 3487, dated January 1; terms 2/10, n/30; FOB shipping point, freight prepaid and added to the invoice, $125.43 (total $785.43).

4    Bought ten Beauty Candle Travel Sets from Calhoun Candles, Inc., $420, invoice no. 4513, dated January 1; terms net 45; FOB destination.

12    Sold four Mango Bath and Shower Gels on account to R. Kielman, sales slip no. 1456, $120, plus sales tax of $9.60, total $129.60.

13    Received credit memo no. 8715 from Calhoun Candles, Inc., for merchandise returned, $84.

21    Bought five Winter Skin Essentials Kits from Whitney and Waters, $197.50, invoice no. A875, dated January 18; terms 2/15, n/45; FOB destination.

25    Sold three Winter Skin Essentials on account to A. Benner, sales slip no. 1457, $135.75, plus sales tax of $10.86, total $146.61.

27    Issued credit memo no. 33 to A. Benner for merchandise returned, $45.25 plus $3.62 sales tax, total $48.87.

Required

1. 1. If using Working Papers, open the following accounts in the accounts receivable ledger and record the balances as of January 1: A. Benner, $45.77; R. Kielman, $175.39. Write Balance in the Item column and place a check mark in the Post. Ref. column. Skip this step if using CengageNow.
2. 2. If using Working Papers, open the following accounts in the accounts payable ledger and record the balances as of January 1: Calhoun Candles, Inc., $355.23; Madden, Inc., $573.15; Whitney and Waters, $50.25. Write Balance in the Item column and place a check mark in the Post. Ref. column. Skip this step if using CengageNow.
3. 3. If using Working Papers, record the January 1 balances in the general ledger as given: Accounts Receivable 113 controlling account, $221.16; Accounts Payable 212 controlling account, $978.63; Sales Tax Payable 214, $128.45. Write Balance in the Item column and place a check mark in the Post. Ref. column. Skip this step if using CengageNow.
4. 4. Record the transactions in the general journal. If using Working Papers, begin on page 25.
5. 5. Post the entries to the general ledger and accounts receivable ledger or accounts payable ledger as appropriate.
6. 6. Prepare a schedule of accounts receivable.
7. 7. Prepare a schedule of accounts payable.
8. 8. Compare the totals of the schedules with the balances of the controlling accounts.

To determine

Prepare journal entry to record the given transaction.

Explanation of Solution

Merchandise Inventory:

Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a trader, to be sold within a year. Merchandise Inventory is a current asset account which includes all the costs incurred to acquire merchandise, and process it further for sale.

Date	Account Titles and explanation	Post.Ref	Debit ($)	Credit ($)
January3	Purchase	511	660.00
	Freight in	514	125.43
	Accounts payable	212		785.43
	(To record the purchase of merchandise from the Company M, invoice no.3487 terms n/30)
January 4	Purchase	511	420.00
	Accounts payable	212		420.0
	(To record the purchase of merchandise from the Company C, invoice no.4513 terms n/30)
January12	Accounts receivable	113	129.60
	Sales	411		120.00
	Sales tax payable	214		9.60
	(To record the sale of merchandise to Company K,  sales slip no.1456)
January13	Accounts payable	212	84.00
	Purchase returns and allowance	512		84.00
	(To record the credit memo no.8715 for return of  merchandise)
January21	Purchase	511	197.50
	Accounts payable	212		197.50
	(To record the purchase of merchandise from the Company W, invoice no. A875)
January25	Accounts receivable	113	146.61
	Sales	411		135.75
	Sales tax payable	214		10.86
	(To record the sale of merchandise to Company B,  sales slip no.1457)
January27	Sales returns and allowances	412	45.25
	Sales tax payable	214	3.62
	Accounts receivable	113		48.87
	(To record the issuance of credit memo no.33)

Table (1)

To determine

Enter the opening balance, post the transactions and close the balance of the respective accounts in the general ledger and accounts payable ledger and accounts receivable ledger.

Explanation of Solution

Accounts Receivable                    Account  No: 113
Date		Item	Post Ref.	Debit	Credit	Balance
						Debit	Credit
January	1	Balance				221.61
	12			129.60		350.76
	25			146.61		497.37
	27				48.87	448.50

Table (2)

Accounts Payable                   Account  No: 212
Date		Item	Post Ref.	Debit	Credit	Balance
						Debit	Credit
January	1	Balance					978.63
	3				785.43		1,764.06
	4				420.00		2,184.06
	13			84.00			2,100.06
	21				197.50		2,297.56

Table (3)

Sales tax payable                 Account  No: 214
Date		Item	Post Ref.	Debit	Credit	Balance
						Debit	Credit
January	1	Balance					128.45
	12				9.60		138.05
	25				10.86		148.91
	27			3.62			145.29

Table (4)

Sales                                           Account  No: 411
Date		Item	Post Ref.	Debit	Credit	Balance
						Debit	Credit
January	12				120.00		120.00
	25				135.75		255.75

Table (5)

Sales returns and allowance               Account  No: 412
Date		Item	Post Ref.	Debit	Credit	Balance
						Debit	Credit
January	27			45.25		45.25

Table (6)

Purchase                                 Account  No: 511
Date		Item	Post Ref.	Debit	Credit	Balance
						Debit	Credit
January	3			660.00		660.00
	4			420.00		1,080.00
	21			197.50		1,277.50

Table (7)

Purchase returns and allowance           Account  No: 512
Date		Item	Post Ref.	Debit	Credit	Balance
						Debit	Credit
January	13				84.00		84.00

Table (8)

Freight  In                                 Account  No: 514
Date		Item	Post Ref.	Debit	Credit	Balance
						Debit	Credit
January	3			125.43		125.43

Table (9)

Accounts receivable ledger
Name : Company B
Date		Item	Post Ref.	Debit	Credit	Balance
January	1	Balance				45.77
	25			146.61		192.38
	27				48.87	143.51

Table (10)

Accounts receivable ledger
Name : Company K
Date		Item	Post Ref.	Debit	Credit	Balance
January	1					175.39
	12			129.60		304.99

Table (11)

Accounts payable ledger
Name : Company C
Date		Item	Post Ref.	Debit	Credit	Balance
January	1	Balance				355.23
	4				420.00	775.23
	13			84.00		691.23

Table (12)

Accounts payable ledger
Name : Company M
Date		Item	Post Ref.	Debit	Credit	Balance
January	1					573.15
	3				785.43	1,358.58

Table (13)

Accounts payable ledger
Name : Company W
Date		Item	Post Ref.	Debit	Credit	Balance
January	1					50.25
	21				197.50	247.75

 Table (14)

To determine

Prepare Company S’s schedule of accounts receivable, accounts payable and compare the total with accounts receivable controlling ledger and accounts payable controlling ledger.

Explanation of Solution

Prepare Company S’s schedule of accounts receivable and accounts payable:

Company S
Schedule of accounts receivable
January 31,20--
Particulars	Amount  in $
Company B	143.51
Company K	304.99
Total accounts receivable	448.50

Table (15)

Company S
Schedule of accounts payable
January 31,20--
Particulars	Amount  in $
Company C	691.23
Company M	1,358.58
Company W	247.75
Total accounts receivable	2,297.56

Table (16)