Chapter 9, Problem 3PB

May’s Beauty Store records sales and purchase transactions in the general journal. In addition to a general ledger, May’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. 2    Bought nine Matte Nail Color Kits from Mejia, Inc., $450, invoice no. 4521, dated January 1; terms 2/10, n/30; FOB shipping point, freight prepaid and added to the invoice, $87.50 (total $537.50).

5    Bought 30 Perfume Cocktail Rings from Braun, Inc., $1,200, invoice no. 37A, dated January 3; terms 2/10, n/30; FOB destination.

8    Sold two Matte Nail Color Kits on account to J. Herbert, sales slip no. 113, $110, plus sales tax of $8.80, total $118.80.

11    Received credit memo no. 455 from Braun, Inc., for merchandise returned, $315.25.

18    Bought 15 Eye Palettes from Vargas, Inc., $660, invoice no. 910, dated January 14; terms net 30; FOB destination.

23    Sold four Eye Palettes on account to T. Cantrell, sales slip no. 114, $200, plus sales tax of $16, total $216.

26    Issued credit memo no. 12 to T. Cantrell for merchandise returned, $50 plus $4 sales tax, total $54.

Required

1. 1. If using Working Papers, open the following accounts in the accounts receivable ledger and record the balances as of January 1: T. Cantrell, $86.99; J. Hebert, $63.47. 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: Braun, Inc., $513.20; Mejia, Inc., $113.40; Vargas, Inc., $67.15. 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, $150.46; Accounts Payable 212 controlling account, $693.75; Sales Tax Payable 214, $237.89. 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 17.
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 ($)	Credit ($)
January2	Purchase	511	450.00
	Freight in	514	87.50
	Accounts payable	212		537.50
	(To record the purchase of merchandise from the Company M, invoice no.4521 terms n/30)
January 5	Purchase	511	1,200.00
	Accounts payable	212		1,200.00
	(To record the purchase of merchandise from the Company B, invoice no.37A terms n/30)
January8	Accounts receivable	113	118.80
	Sales	411		110.00
	Sales tax payable	214		80.00
	(To record the sale of merchandise to Company H,  sales slip no.113)
January11	Accounts payable	212	315.25
	Purchase returns and allowance	512		315.25
	(To record the credit memo no.455 for return of  merchandise)
January18	Purchase	511	660.00
	Accounts payable	212		660.00
	(To record the purchase of merchandise from the Company V, invoice no. 910 terms net 30)
January23	Accounts receivable	113	216.00
	Sales	411		200.00
	Sales tax payable	214		16.00
	(To record the sale of merchandise to Company C,  sales slip no.114)
January26	Sales returns and allowances	412	50.00
	Sales tax payable	214	4.00
	Accounts receivable	113		54.00
	(To record the issuance of credit memo no.12)

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				150.46
	8			118.80		269.26
	23			216.00		485.26
	26				54.00	431.26

Table (2)

Accounts Payable                   Account  No: 212
Date		Item	Post ref.	Debit	Credit	Balance
						Debit	Credit
January	1	Balance					693.75
	2				537.50		1,231.25
	5				1,200.00		2,431.25
	11			315.25			2,116.00
	18				660.00		2,776.00

Table (3)

Sales tax payable                 Account  No: 214
Date		Item	Post ref.	Debit	Credit	Balance
						Debit	Credit
January	1	Balance					237.89
	8				8.80		246.69
	23				16.00		262.69
	26			4.00			258.69

Table (4)

Sales                                           Account  No: 411
Date		Item	Post ref.	Debit	Credit	Balance
						Debit	Credit
January	8				110.00		110.00
	23				200.00		310.00

Table (5)

Sales returns and allowance               Account  No: 412
Date		Item	Post ref.	Debit	Credit	Balance
						Debit	Credit
January	26			50.00		50.00

Table (6)

Purchase                                 Account  No: 511
Date		Item	Post ref.	Debit	Credit	Balance
						Debit	Credit
January	2			450.00		450.00
	5			1,200.00		1,650.00
	18			660.00		2,310.00

Table (7)

Purchase returns and allowance           Account  No: 512
Date		Item	Post ref.	Debit	Credit	Balance
						Debit	Credit
January	11				315.25		315.25

Table (8)

Freight  In                                 Account  No: 514
Date		Item	Post ref.	Debit	Credit	Balance
						Debit	Credit
January	2			87.50		87.50

Table (9)

Accounts receivable ledger
Name : Company S
Date		Item	Post Ref.	Debit	Credit	Balance
January	1	Balance				86.99
	23			216.00		302.99
	26				54.00	248.99

Table (10)

Accounts receivable ledger
Name : Company H
Date		Item	Post Ref.	Debit	Credit	Balance
January	1					63.47
	8			118.80		182.27

Table (11)

Accounts payable ledger
Name : Company B
Date		Item	Post Ref.	Debit	Credit	Balance
January	1	Balance				513.20
	5				1,200.00	1,713.20
	11			315.25		1,397.95

Table (12)

Accounts payable ledger
Name : Company M
Date		Item	Post Ref.	Debit	Credit	Balance
January	1					113.40
	2				537.50	650.90

Table (13)

Accounts payable ledger
Name : Company V
Date		Item	Post Ref.	Debit	Credit	Balance
January	1					67.15
	18				660.00	727.15

 Table (14)

To determine

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

Company M
Schedule of accounts receivable
January 31,20--
Particulars	Amount  in $
Company C	248.99
Company H	182.27
Total accounts receivable	431.26

Table (15)

Company M
Schedule of accounts payable
January 31,20--
Particulars	Amount  in $
Company B	1,397.95
Company M	650.90
Company V	727.15
Total accounts receivable	2,776.00

Table (16)