Accounting for a merchandising business

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614 PART 3 Accounting for a Merchandising Business

COMPREHENSIVE Question 2: ACCOUNTING CYCLE

WITH SUBSIDIARY LEDGERS, PART 1

During the second half of December 20-1, TJ’s Specialty Shop engaged in the following

transactions:

 Dec. 16 Received payment from Lucy Greene on account, $1,960.

 16 Sold merchandise on account to Kim Fields, $160, plus sales tax of $8. Sale No. 640.

 17 Returned merchandise to Evans Essentials for credit, $150.

 18  Issued Check No. 813 to Evans Essentials in payment of December 1 balance of $1,250, less the credit received on December 17.

 19 Sold merchandise on account to Lucy Greene, $620, plus tax of $31. Sale No. 641.

 22 Received payment from John Dempsey on account, $1,560.

 23 Issued Check No. 814 for the purchase of supplies, $120. (Debit Supplies)

 24  Purchased merchandise on account from West Wholesalers, $1,200.

Invoice No. 465, dated December 24, terms n/30.

 26  Purchased merchandise on account from Nathen Co., $800.

Invoice No. 817, dated December 26, terms 2/10, n/30.

 27  Issued Check No. 815 in payment of utilities expense for the month of December, $630.

 27  Sold merchandise on account to John Dempsey, $2,020, plus tax of $101.

Sale No. 642.

 29 Received payment from Martha Boyle on account, $2,473.

 29  Issued Check No. 816 in payment of wages (Wages Expense) for the two-week

period ending December 28, $1,100.

 30  Issued Check No. 817 to Meyers Trophy Shop for a cash purchase of merchandise, $200.

  As of December 16, TJ’s account balances were as follows:

Account Account No. Debit Credit

Cash  101 $ 9,705

Accounts Receivable 122 10,256

Merchandise Inventory 131 21,800

Supplies 141 1,035

Prepaid Insurance 145 1,380

Land  161 8,700

Building 171 52,000

Accum. Depr.––Building 171.1  $  9,200

Store Equipment 181 28,750

Accum. Depr.––Store Equipment 181.1  9,300

Accounts Payable 202  3,600

Wages Payable 219

Sales Tax Payable 231  1,378

Mortgage Payable 251  12,525

Tom Jones, Capital 311  90,000

Tom Jones, Drawing 312 8,500

Income Summary 313

Sales  401  124,900

Comprehensive Question 2          Accounting Cycle with Subsidiary Ledgers, Part 1 615

Sales Returns and Allowances 401.1 $    1,430

Purchases 501 64,400

Purchases Returns and Allowances 501.1  $       460

Purchases Discounts 501.2  698

Freight-In 502 175

Wages Expense 511 26,100

Advertising Expense 512 4,700

Supplies Expense 524

Telephone Expense 525 2,180

Utilities Expense 533 6,900

Insurance Expense 535

Depr. Expense—Building 540

Depr. Expense––Store Equipment 541

Miscellaneous Expense 549 2,700

Interest Expense 551    1,350 000 0000

$252,061 $252,061

TJ’s also had the following subsidiary ledger balances as of December 16:

Accounts Receivable Ledger

Customer Balance

Martha Boyle

12 Jude Lane

Hartford, CT06117 $3,796

Anne Clark

52 Juniper Road

Hartford, CT06118 2,100

John Dempsey

700 Hobbes Dr.

Avon, CT06108 1,560

Kim Fields

5200 Hamilton Ave.

Hartford, CT06117 ––

Lucy Greene

236 Bally Lane

Simsbury, CT06123 2,800

Accounts Payable Ledger

Vendor Balance

Evans Essentials

34 Harry Ave.

East Hartford, CT05234 $3,600

Nathen Co.

1009 Drake Rd.

Farmington, CT06082 ––

Owen Enterprises

43 Lucky Lane

Bristol, CT06007 ––

West Wholesalers

888 Anders Street

Newington, CT06789 ––

At the end of the year, the following adjustments (a)–(g) need to be made:

(a, b)  Merchandise inventory as of December 31,

$19,700.

 (c) Unused supplies on hand, $525.

 (d) Unexpired insurance on December 31, $1,000.

 (e)  Depreciation expense on the building for the

year, $800.

(f)  Depreciation expense on the store equipment for

the year, $450.

(g)  Wages earned but not paid as of December 31,

$330.

Requirements and working papers for this problem are provided in two versions:

General Journal based and Special Journals based. Complete the version as directed

by your instructor.

REQUIRED—GENERAL JOURNAL REQUIRED—SPECIAL JOURNALS

For those not using working papers: For those not using working papers:

1.  If you are not using the working papers, open a general ledger, an accounts receivable ledger, and an accounts payable ledger as of December 16. Enter the December 16 balance of each of the accounts, with a check mark in the Posting Reference column.

1.  If you are not using the working papers:

   a.  Open a general ledger, an accounts receivable ledger, and an accounts payable ledger as of

December 16. Enter the following December 16 balances in the general ledger accounts and

place a check mark in the Posting Reference column.

Cash $  11,500

Accounts Receivable 7,823

Accounts Payable 6,850

Sales Tax Payable 933

Sales 116,000

Purchases 60,500

Purchases Discounts 575

   b.  Enter the December 16 balances in the rest of the general ledger accounts, as indicated in the trial balance, and place a check mark in the Posting Reference column.

   c.  Enter the December 16 balances in the accounts receivable and accounts payable ledgers, as

indicated in the subsidiary ledger account  listings, and place a check mark in the Posting

Reference column.  d.  Insert Dec. 1–15, Cumulative Amount, and the

following amounts in the special journal  columns.

       Sales Journal: Accounts Receivable Dr., 4,263;

Sales Cr., 4,060; Sales Tax Payable Cr., 203.

       Cash Receipts Journal: Accounts Receivable

Cr., 1,830; Sales Cr., 4,840; Sales Tax Pay.

Cr., 242; Cash Dr., 6,912.

       Purchases Journal: Purchases Dr./Accts. Pay.

Cr., 3,900.

       Cash Payments Journal: General Dr., 1,680;

Accounts Payable Dr., 7,150; Purchases

Discounts Cr., 123; Cash Cr., 8,707.

For working paper users and nonusers: For working paper users and nonusers:

2.  Enter transactions for the second half of December in the general journal. Post immediately to the accounts receivable and accounts payable ledgers.

2.  Enter transactions for the second half of December in the proper journals. If you are using the working papers, the cumulative amount of entries in the special journals for December 1–15 has been entered in these journals for you.

Post immediately to the Accounts receivable and accounts payable ledgers.

3.  Post from the journal to the general ledger. 3.  Post from the journals to the general ledger. Post the journals in the following order: general, sales,

 

purchases, cash receipts, and cash payments.