Chapter Review
5-6fExercises
Identify Postings from Revenue Journal
OBJ. 2
Accounts Receivable Ledger
OBJ. 2
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Based on the data presented in Exercise 5-1, assume that the beginning balances for the customer accounts were zero, except for Jordan Inc., which had a $1,080 beginning balance. In addition, there were no collections during the period.
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Set up a T account for Accounts Receivable and T accounts for the four accounts needed in the customer ledger.
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Post to the T accounts.
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Determine the balance in the accounts.
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Prepare a listing of the accounts receivable customer balances as of May 31, 20Y3.
AnswerCheck Figure: Total accounts receivable, $13,980
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Identify Journals
OBJ. 2
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Assuming the use of a two-column (all-purpose) general journal, a revenue journal, and a cash receipts journal as illustrated in this chapter, indicate the journal in which each of the following transactions should be recorded:
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Receipt of cash refund from overpayment of taxes.
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Adjustment to record accrued salaries at the end of the year.
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Providing services on account.
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Investment of additional cash in the business by the owner.
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Receipt of cash on account from a customer.
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Receipt of cash for rent.
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Receipt of cash from sale of office equipment.
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Sale of used office equipment on account, at cost, to a neighboring business.
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Closing of drawing account at the end of the year.
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Providing services for cash.
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Identify Journals
OBJ. 2
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Assuming the use of a two-column (all-purpose) general journal, a purchases journal, and a cash payments journal as illustrated in this chapter, indicate the journal in which each of the following transactions should be recorded:
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Payment of six months’ rent in advance.
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Purchase of an office computer on account.
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Purchase of office supplies on account.
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Adjustment to record depreciation at the end of the month.
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Adjustment to record accrued salaries at the end of the period.
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Purchase of services on account.
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Adjustment to prepaid rent at the end of the month.
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Purchase of office equipment for cash.
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Adjustment to prepaid insurance at the end of the month.
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Purchase of office supplies for cash.
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Advance payment of a one-year fire insurance policy on the office.
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Identify Transactions in Accounts Receivable Subsidiary Ledger
OBJ. 2
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The debits and credits from three related transactions are presented in the following customer’s account taken from the accounts receivable subsidiary ledger:
NAME ADDRESS
Mission Design 1319 Elm Street
Date
Item
Post. Ref.
Debit
Credit
Balance
20Y7
Apr. 3
R44
740
740
6
J11
60
680
24
CR81
680
—
Describe each transaction and identify the source of each posting.
Prepare Journal Entries in a Revenue Journal
OBJ. 2
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Shannon Consulting Company had the following transactions during the month of October:
Oct. 2. Issued Invoice No. 321 to Pryor Corp. for services rendered on account, $1,625. 3. Issued Invoice No. 322 to Armor Inc. for services rendered on account, $850. 14. Issued Invoice No. 323 to Pryor Corp. for services rendered on account, $565. 24. Issued Invoice No. 324 to Rose Co. for services rendered on account, $2,320. 29. Collected Invoice No. 321 from Pryor Corp. -
Record the October revenue transactions for Shannon Consulting Company in the following revenue journal format:
REVENUE JOURNAL
Date
Invoice No.
Account Debited
Post. Ref.
Accts. Rec. Dr. Fees Earned Cr.
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What is the total amount posted to the accounts receivable and fees earned accounts from the revenue journal for October?
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What is the October 31 balance of the Pryor Corp. customer account assuming a zero balance on October 1?
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Posting a Revenue Journal
OBJ. 2, 3
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The revenue journal for Sapling Consulting Inc. follows. The accounts receivable controlling account has a July 1, 20Y2, balance of $625 consisting of an amount due from Aladdin Co. There were no collections during July.
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Prepare a T account for the accounts receivable customer accounts.
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Post the transactions from the revenue journal to the customer accounts and determine their ending balances.
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Prepare T accounts for the accounts receivable and fees earned accounts. Post control totals to the two accounts and determine the ending balances.
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Prepare a schedule of the customer account balances to verify the equality of the sum of the customer account balances and the accounts receivable controlling account balance.
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How might a computerized system differ from a revenue journal in recording revenue transactions?
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Accounts Receivable Subsidiary Ledger
OBJ. 2
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The revenue and cash receipts journals for Birmingham Productions Inc. follow. The accounts receivable control account has a January 1, 20Y4, balance of $4,720 consisting of an amount due from Clear Pointe Studios Inc.
Prepare a listing of the accounts receivable customer balances and verify that the total agrees with the ending balance of the accounts receivable controlling account.
AnswerCheck Figure: Accounts Receivable balance, January 31, $10,310
Revenue and Cash Receipts Journals
OBJ. 2
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Transactions related to revenue and cash receipts completed by Augusta Inc. during the month of March 20Y8 are as follows:
Mar. 2. Issued Invoice No. 512 to Santorini Co., $2,135. 4. Received cash from CMI Inc., on account, for $475. 8. Issued Invoice No. 513 to Gabriel Co., $520. 12. Issued Invoice No. 514 to Yarnell Inc., $1,985. 19. Received cash from Yarnell Inc., on account, $1,305. 20. Issued Invoice No. 515 to Electronic Central Inc., $455. 28. Received cash from Marshall Inc. for services provided, $380. 29. Received cash from Santorini Co. for Invoice No. 512 of March 2. 31. Received cash from McCleary Co. for services provided, $195. Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted.
Revenue and Cash Receipts Journals
OBJ. 2
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Lasting Summer Inc. has $2,510 in the October 1 balance of the accounts receivable account consisting of $1,060 from Champion Co. and $1,450 from Wayfarer Co. Transactions related to revenue and cash receipts completed by Lasting Summer Inc. during the month of October 20Y5 are as follows:
Oct. 3. Issued Invoice No. 622 for services provided to Palace Corp., $2,890. 5. Received cash from Champion Co., on account, for $1,060. 8. Issued Invoice No. 623 for services provided to Sunny Style Inc., $1,940. 12. Received cash from Wayfarer Co., on account, for $1,450. 18. Issued Invoice No. 624 for services provided to Amex Services Inc., $2,970. 23. Received cash from Palace Corp. for Invoice No. 622 of October 3. 28. Issued Invoice No. 625 to Wayfarer Co., on account, for $900. 30. Received cash from Rogers Co. for services provided, $120. -
Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted.
AnswerCheck Figure: Revenue journal total, $8,700
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Prepare a listing of the accounts receivable customer balances and verify that the total of the accounts receivable customer balances equals the balance of the accounts receivable controlling account on October 31, 20Y5.
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Why does Lasting Summer Inc. use a subsidiary ledger for accounts receivable?
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Identify Postings from Purchases Journal
OBJ. 2
Identify Postings from Cash Payments Journal
OBJ. 2
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Using the following cash payments journal, identify each of the posting references, indicated by a letter, as representing (1) a posting to a general ledger account, (2) a posting to a subsidiary ledger account, or (3) that no posting is required.
Identify Transactions in Accounts Payable Subsidiary Ledger
OBJ. 2
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The debits and credits from three related transactions are presented in the following creditor’s account taken from the accounts payable ledger:
NAME
ADDRESS
Apex Performance Co.
101 W. Stratford Ave.
Date
Item
Post. Ref.
Debit
Credit
Balance
20Y7
June 6
P49
12,000
12,000
14
J12
150
11,850
16
CP23
11,850
—
Describe each transaction and identify the source of each posting.
Prepare Journal Entries in a Purchases Journal
OBJ. 2
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Fernandez Services Inc. had the following transactions during the month of April:
Apr. 4. Purchased office supplies from Officemate Inc. on account, $825. 9. Purchased office equipment on account from Tek Village Inc., $4,890. 16. Purchased office supplies from Officemate Inc. on account, $365. 19. Purchased office supplies from Paper-to-Go Inc. on account, $385. 27. Paid invoice on April 4 purchase from Officemate Inc. -
Record the April purchase transactions for Fernandez Services Inc. in the following purchases journal format:
PURCHASES JOURNAL
Date
Account Credited
Post. Ref.
Accts. Payable Cr.
Office Supplies Dr.
Other Accounts Dr.
Post. Ref.
Amount
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What is the total amount posted to the accounts payable and office supplies accounts from the purchases journal for April?
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What is the April 30 balance of the Officemate Inc. creditor account assuming a zero balance on April 1?
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Posting a Purchases Journal
OBJ. 2, 3
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The purchases journal for Newmark Exterior Cleaners Inc. follows. The accounts payable account has a March 1, 20Y2, balance of $580 for an amount owed to Nicely Co. No payments were made on creditor invoices during March.
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Prepare a T account for the accounts payable creditor accounts.
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Post the transactions from the purchases journal to the creditor accounts and determine their ending balances.
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Prepare T accounts for the accounts payable control and cleaning supplies accounts. Post control totals to the two accounts, and determine their ending balances. Cleaning Supplies had a zero balance at the beginning of the month.
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Prepare a schedule of the creditor account balances to verify the equality of the sum of the accounts payable creditor balances and the accounts payable controlling account balance.
AnswerCheck Figure: Total accounts payable, $5,840
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How might a computerized accounting system differ from the use of a purchases journal in recording purchase transactions?
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Accounts Payable Subsidiary Ledger
OBJ. 2
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The cash payments and purchases journals for Magnolia Landscaping follow. The accounts payable control account has a June 1, 20Y1, balance of $3,590, consisting of an amount owed to Augusta Sod Co.
Prepare a schedule of the accounts payable creditor balances and determine that the total agrees with the ending balance of the accounts payable controlling account.
AnswerCheck Figure: Accts. Pay., June 30, $34,740
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Purchases and Cash Payments Journals
OBJ. 2
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Transactions related to purchases and cash payments completed by Wisk Away Cleaning Services Inc. during the month of May 20Y5 are as follows:
May 1. Issued Check No. 57 to Bio Safe Supplies Inc. in payment of account, $345. 3. Purchased cleaning supplies on account from Brite N’ Shine Products Inc., $200. 8. Issued Check No. 58 to purchase equipment from Carson Equipment Sales, $2,860. 12. Purchased cleaning supplies on account from Porter Products Inc., $360. 15. Issued Check No. 59 to Bowman Electrical Service in payment of account, $145. 18. Purchased supplies on account from Bio Safe Supplies Inc., $240. 20. Purchased electrical repair services from Bowman Electrical Service on account, $110. 26. Issued Check No. 60 to Brite N’ Shine Products Inc. in payment of May 3 invoice. 31. Issued Check No. 61 in payment of salaries, $5,600. Prepare a purchases journal and a cash payments journal to record these transactions. The forms of the journals are similar to those illustrated in the text. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts payable subsidiary ledger should be posted. Wisk Away Cleaning Services Inc. uses the following accounts:
Cash
11
Cleaning Supplies
14
Equipment
18
Accounts Payable
21
Salary Expense
51
Electrical Service Expense
53
AnswerCheck Figure: Purchases journal, Accts. Pay., Total, $910
Purchases and Cash Payments Journals
OBJ. 2
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Happy Tails Inc. has a September 1, 20Y4, accounts payable balance of $620, which consists of $320 due Labradore Inc. and $300 due Meow Mart Inc. Transactions related to purchases and cash payments completed by Happy Tails Inc. during the month of September 20Y4 are as follows:
Sept. 4. Purchased pet supplies from Best Friend Supplies Inc. on account, $295. 6. Issued Check No. 345 to Labradore Inc. in payment of account, $320. 13. Purchased pet supplies from Poodle Pals Inc. on account, $790. 18. Issued Check No. 346 to Meow Mart Inc. in payment of account, $300. 19. Purchased office equipment from Office Helper Inc. on account, $2,510. 23. Issued Check No. 347 to Best Friend Supplies Inc. in payment of account from purchase made on September 4. 27. Purchased pet supplies from Meow Mart Inc. on account, $450. 30. Issued Check No. 348 to Jennings Inc. for cleaning expenses, $80. -
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Prepare a purchases journal and a cash payments journal to record these transactions. The forms of the journals are similar to those used in the text. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts payable subsidiary ledger should be posted. Happy Tails Inc. uses the following accounts:
Cash
11
Pet Supplies
14
Office Equipment
18
Accounts Payable
21
Cleaning Expense
54
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Prepare a listing of accounts payable creditor balances on September 30, 20Y4. Verify that the total of the accounts payable creditor balances equals the balance of the accounts payable controlling account on September 30, 20Y4.
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Why does Happy Tails Inc. use a subsidiary ledger for accounts payable?
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Error in Accounts Payable Subsidiary Ledger
OBJ. 2
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After Bunker Hill Assay Services Inc. had completed all postings for March in the current year (20Y4), the sum of the balances in the following accounts payable ledger did not agree with the $36,600 balance of the controlling account in the general ledger:
NAME
ADDRESS
C. D. Greer and Son
972 S. Tenth Street
Date
Item
Post. Ref.
Debit
Credit
Balance
20Y4
Mar. 17
P30
3,750
3,750
27
P31
12,000
15,750
NAME
ADDRESS
Carbon Supplies Inc.
1170 Mattis Avenue
Date
Item
Post. Ref.
Debit
Credit
Balance
20Y4
Mar. 1
Balance
✓
8,300
9
P30
7,000
14,000
12
J7
300
13,700
20
CP23
5,800
7,900
NAME
ADDRESS
Cutler and Powell
717 Elm Street
Date
Item
Post. Ref.
Debit
Credit
Balance
20Y4
Mar. 1
Balance
✓
6,100
18
CP23
6,100
—
29
P31
7,800
7,800
NAME
ADDRESS
Hudson Bay Minerals Co.
1240 W. Main Street
Date
Item
Post. Ref.
Debit
Credit
Balance
20Y4
Mar. 1
Balance
✓
4,750
10
CP22
4,750
—
17
P30
3,700
3,700
25
J7
3,000
1,700
NAME
ADDRESS
Valley Power
915 E. Walnut Street
Date
Item
Post. Ref.
Debit
Credit
Balance
20Y4
Mar. 5
P30
3,150
3,150
Assuming that the controlling account balance of $36,600 has been verified as correct, (a) determine the error(s) in the preceding accounts and (b) prepare a listing of accounts payable creditor balances (from the corrected accounts payable subsidiary ledger).
Identify Postings from Special Journals
OBJ. 2
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Pinnacle Consulting Company makes most of its sales and purchases on credit. It uses the five journals described in this chapter (revenue, cash receipts, purchases, cash payments, and general). Identify the journal most likely used in recording the postings for selected transactions indicated by letter in the T accounts, as follows:
Cash Receipts Journal
OBJ. 2
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The following cash receipts journal headings have been suggested for a small service firm. List the errors you find in the headings.
CASH RECEIPTS JOURNAL
Page 12
Date
Account Credited
Post. Ref.
Fees Earned Cr.
Accts. Rec. Cr.
Cash Cr.
Other Accounts Dr.
Computerized Accounting Systems
OBJ. 3
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Most computerized accounting systems use electronic forms to record transaction information, such as the invoice form illustrated at the top of Exhibit 7 in this chapter.
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Identify the key input fields (spaces) in an electronic invoice form.
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What accounts are posted from an electronic invoice form?
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Why aren’t special journal totals posted to control accounts at the end of the month in an electronic accounting system?
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Computerized Accounting Systems and E-Commerce
OBJ. 3, 4
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Apple Inc.’s iTunes® provides digital products, such as music, video, and software. Purchases from iTunes are made with credit cards that are on file with the credit card processing company. Such transactions are considered cash transactions. Once the purchases are made, consumers can access the requested digital products for their enjoyment and the charges will show up on their credit card bills.
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What kind of e-commerce application is described by Apple iTunes?
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Assume you purchased 12 songs for $1.25 each on iTunes. Provide the journal entry generated by Apple’s e-commerce application.
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If a special journal were used, what type of special journal would be used to record this sales transaction?
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If an electronic form were used, what type of electronic form would be used to record this sales transaction?
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Would it be appropriate for Apple to use either special journals or electronic forms for sales transactions from iTunes? Explain.
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E-Commerce
OBJ. 4
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For each of the following companies, determine what they primarily sell and whether their e-commerce strategy is primarily business-to-consumer (B2C), business-to-business (B2B), or both. Use the Internet to investigate each company’s site in conducting your research.
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Amazon.com
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Dell Inc.
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DowDuPont Inc.
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Intuit Inc.
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L.L. Bean, Inc.
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W.W. Grainger, Inc.
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Segment Revenue Horizontal Analysis
OBJ. 5
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Starbucks Corporation reported the following geographical segment revenues for a recent and a prior fiscal year:
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Prepare a horizontal analysis of the segment data using the prior year as the base year. Round whole percents to one decimal place.
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Prepare a vertical analysis of the segment data. Round whole percents to one decimal place.
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What conclusions can be drawn from your analyses?
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Segment Revenue Vertical Analysis
OBJ. 5
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Twenty-First Century Fox, Inc. is one of the world’s largest entertainment companies that includes Twentieth Century Fox films, Fox Broadcasting, Fox News, the FX, and various satellite properties. The company provided revenue disclosures by its major product segments in the notes to its financial statements as follows:
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Provide a vertical analysis of the product segment revenue. Round whole percents to one decimal place.
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Are the revenues of Twenty-First Century Fox, Inc. diversified or concentrated within a product segment? Explain.
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Segment Revenue Horizontal and Vertical Analyses
OBJ. 5
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The comparative segment revenues for Yum! Brands, a global quick-serve restaurant company, are as follows:
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Provide a horizontal analysis of the segment revenues using the prior year as the base year. Round whole percents to one decimal place.
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Provide a vertical analysis of the segment revenues for both years. Round whole percents to one decimal place.
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What conclusions can be drawn from your analyses?
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