54 Chapter 7 Accounting Information Systems

EXERCISES: SET B
Determine control account E7-1B Fill Company uses both special journals and a general journal as described in this chapter.
balances, and explain posting On June 30, after all monthly postings had been completed, the Accounts Receivable control
of special journals. account in the general ledger had a debit balance of $200,000; the Accounts Payable control
(SO 2, 4) account had a credit balance of $120,000.
The July transactions recorded in the special journals are summarized below. No entries
affecting accounts receivable and accounts payable were recorded in the general journal for July.
Sales journal Total sales $252,000
Purchases journal Total purchases $151,000
Cash receipts journal Accounts receivable column total $231,000
Cash payments journal Accounts payable column total $142,000
Instructions
(a) What is the balance of the Accounts Receivable control account after the monthly postings
on July 31?
(b) What is the balance of the Accounts Payable control account after the monthly postings on
July 31?
(c) To what account(s) is the column total of $252,000 in the sales journal posted?
(d) To what account(s) is the accounts receivable column total of $231,000 in the cash receipts
journal posted?
Explain postings to subsidiary E7-2B Presented below is the subsidiary accounts receivable account of Jason Sasse.
ledger.
(SO 2)
Date Ref. Debit Credit Balance
2008
Sept. 4 S29 16,000 16,000
7 G4 2,000 14,000
23 CR9 14,000 —

Post various journals to
control and subsidiary
accounts.
(SO 2, 4)
Determine control and
subsidiary ledger balances
for accounts receivable.
(SO 2)
Instructions
Write a memo to Ethan Johnson, chief financial officer, that explains each transaction.
E7-3B On September 1 the balance of the Accounts Receivable control account in the general
ledger of Garland Company was $12,960. The customers’ subsidiary ledger contained account
balances as follows: Garcia $1,940, Vasquez $3,140, Buerhle $2,560, Contreras $5,320. At the end
of September the various journals contained the following information.
Sales journal: Sales to Buerhle $900; to Garcia $1,400; to McCarthy $1,500; to Contreras $1,200.
Cash receipts journal: Cash received from Buerhle $1,610; from Contreras $2,600; from
McCarthy $580; from Vasquez $2,100; from Garcia $1,540.
General journal: An allowance is granted to Contreras $325.
Instructions
(a) Set up control and subsidiary accounts and enter the beginning balances. Do not construct
the journals.
(b) Post the various journals. Post the items as individual items or as totals, whichever would be
the appropriate procedure. (No sales discounts given.)
(c) Prepare a list of customers and prove the agreement of the controlling account with the
subsidiary ledger at September 30, 2008.
E7-4B Yokomoto Company has a balance in its Accounts Receivable control account of $17,000
on January 1, 2008. The subsidiary ledger contains three accounts: Jones Company, balance
$6,000; Blue Company, balance $3,700; and Koines Company. During January, the following
receivable-related transactions occurred.

Credit Sales Collections Returns

Jones Company $14,000 $12,000 $ -0-
Blue Company 11,000 4,000 4,500
Koines Company 13,000 14,000 -0-
 Exercises: Set B 55

Instructions
(a) What is the January 1 balance in the Koines Company subsidiary account?
(b) What is the January 31 balance in the control account?
(c) Compute the balances in the subsidiary accounts at the end of the month.
(d) Which January transaction would not be recorded in a special journal?
E7-5B Final Fantasy Company has a balance in its Accounts Payable control account of $11,600 Determine control and
on January 1, 2008. The subsidiary ledger contains three accounts: Smith Company, balance subsidiary ledger balances
$4,200; Black Company, balance $2,600; and Borkowski Company. During January, the following for accounts payable.
receivable-related transactions occurred. (SO 2)

Purchases Payments Returns

Smith Company $9,500 $8,400 $ -0-
Black Company 7,350 2,600 3,100
Borkowski Company 8,900 9,500 -0-

Instructions
(a) What is the January 1 balance in the Borkowski Company subsidiary account?
(b) What is the January 31 balance in the control account?
(c) Compute the balances in the subsidiary accounts at the end of the month.
(d) Which January transaction would not be recorded in a special journal?
E7-6B Ricardo Company uses special journals and a general journal. The following transactions Record transactions in sales
occurred during September 2008. and purchases journal.
(SO 2, 3)
Sept. 2 Sold merchandise on account to P. Montgomery, invoice no. 101, $900, terms n/30. The
cost of the merchandise sold was $540.
10 Purchased merchandise on account from S. Moiz $800, terms 2/10, n/30.
12 Purchased office equipment on account from B. Conway 7,000.
21 Sold merchandise on account to C. White, invoice no. 102 for $1,000, terms 2/10, n/30.
The cost of the merchandise sold was $600.
25 Purchased merchandise on account from C. Wizorek $1,200, terms n/30.
27 Sold merchandise to S. Kleisath for $850 cash. The cost of the merchandise sold was
$510.

Instructions
(a) Prepare a sales journal (see Illustration 7-7) and a single-column purchase journal (see
Illustration 7-13). (Use page 1 for each journal.)
(b) Record the transaction(s) for September that should be journalized in the sales journal and
the purchases journal.
E7-7B Farimer Co. uses special journals and a general journal. The following transactions oc- Record transactions in cash
curred during May 2008. receipts and cash payments
journal.
May 1 Z. Farimer invested $30,000 cash in the business.
(SO 2, 3)
2 Sold merchandise to C. Bounder for $3,800 cash. The cost of the merchandise sold was
$2,500.
3 Purchased merchandise for $4,300 from A. Strider using check no. 101.
14 Paid salary to W. Gandolf $450 by issuing check no. 102.
16 Sold merchandise on account to H. Frodo for $550, terms n/30. The cost of the mer-
chandise sold was $350.
22 A check of $5,400 is received from R. Moody in full for invoice 101; no discount given.

Instructions
(a) Prepare a multiple-column cash receipts journal (see Illustration 7-9) and a multiple-
column cash payments journal (see Illustration 7-16). (Use page 1 for each journal.)
(b) Record the transaction(s) for May that should be journalized in the cash receipts journal
and cash payments journal.
56 Chapter 7 Accounting Information Systems

Explain journalizing in cash E7-8B Candle Company uses the columnar cash journals illustrated in the textbook. In April,
journals. the following selected cash transactions occurred.
(SO 3) 1. Received cash refund from supplier for merchandise returned.
2. Received collection from customer within the 3% discount period.
3. Made cash sales.
4. Paid a creditor within the 3% discount period.
5. Received collection from customer after the 3% discount period had expired.
6. Paid freight on merchandise purchased.
7. Paid cash for office equipment.
8. Made a refund to a customer for return of damaged goods.
9. Withdrew cash for personal use of owner.
10. Purchased merchandise for cash.
Instructions
Indicate (a) the journal, and (b) the columns in the journal that should be used in recording each
transaction.
Journalize transactions in E7-9B Javier Company has the following selected transactions during March.
general journal and post.
Mar. 2 Purchased equipment costing $7,500 from Juan Company on account.
(SO 2, 4)
5 Received credit of $350 from Mark Company for merchandise damaged in ship-
ment to Javier.
7 Issued credit of $300 to Fred Company for merchandise the customer returned.
The returned merchandise had a cost of $200.
Javier Company uses a one-column purchases journal, a sales journal, the columnar cash journals
used in the text, and a general journal.
Instructions
(a) Journalize the transactions in the general journal.
(b) In a brief memo to the president of Javier Company, explain the postings to the
control and subsidiary accounts from each type of journal.
Indicate journalizing in special E7-10B Below are some typical transactions incurred by Khan Company.
journals.
1. Return of merchandise sold for credit.
(SO 3) 2. Payment of creditors on account.
3. Collection on account from customers.
4. Sale of merchandise on account.
5. Sale of land for cash.
6. Sale of merchandise for cash.
7. Received credit for merchandise purchased on credit.
8. Payment of employee wages.
9. Sales discount taken on goods sold.
10. Income summary closed to owner’s capital.
11. Purchase of office supplies for cash.
12. Depreciation on building.
13. Purchase of merchandise on account.
Instructions
For each transaction, indicate whether it would normally be recorded in a cash receipts journal,
cash payments journal, sales journal, single-column purchases journal, or general journal.
Explain posting to control E7-11B The general ledger of Pancho Company contained the following Accounts Payable con-
account and subsidiary ledger. trol account (in T-account form). Also shown is the related subsidiary ledger.
(SO 2, 4)
GENERAL LEDGER
Accounts Payable
Feb. 15 General journal 1,900 Feb. 1 Balance 29,500
28 ? ? 5 General journal 400
11 General journal 700
28 Purchases 55,000
Feb. 28 Balance 31,000
 Exercises: Set B 57

ACCOUNTS PAYABLE LEDGER

Sanchez Ramirez
Feb. 28 Bal. 16,400 Feb. 28 Bal. ?

Ibanez
Feb. 28 Bal. 3,200

Instructions
(a) Indicate the missing posting reference and amount in the control account, and the missing
ending balance in the subsidiary ledger.
(b) Indicate the amounts in the control account that were dual-posted (i.e., posted to the
control account and the subsidiary accounts).
E7-12B Selected accounts from the ledgers of June Company at July 31 showed the Prepare purchases and general
following. journals.
(SO 2, 3)

GENERAL LEDGER
Store Equipment No. 153 Merchandise Inventory No. 120
Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
July 1 G1 3,500 3,500 July 15 G1 500 500
18 G1 120 380
Accounts Payable No. 201
25 G1 180 200
Date Explanation Ref. Debit Credit Balance 31 P1 7,350 7,550
July 1 G1 3,500 3,500
15 G1 500 4,000
18 G1 120 3,880
25 G1 180 3,700
31 P1 7,350 11,050

ACCOUNTS PAYABLE LEDGER

Alba Equipment Co. Durham Co.
Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
July 1 G1 3,500 3,500 July 14 P1 950 950
25 G1 180 770
Blitz Co. Ekedahl Co.
Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
July 3 P1 2,200 2,200 July 12 P1 400 400
20 P1 600 2,800 21 P1 550 950
Concho Corp. Flatch Inc.
Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
July 17 P1 1,250 1,250 July 15 G1 500 500
18 G1 120 1,130
29 P1 1,400 2,530

Instructions
From the data prepare:
(a) the single-column purchases journal for July.
(b) the general journal entries for July.
E7-13B Dust Products uses both special journals and a general journal as described in this Determine correct posting
chapter. Dust also posts customers’ accounts in the accounts receivable subsidiary ledger. The amount to control account.
postings for the most recent month are included in the subsidiary T accounts on the next page. (SO 4)
58 Chapter 7 Accounting Information Systems

Wind Point
Bal. 500 375 Bal. 225 225
300 360

Kansas Walsh
Bal. –0– 210 Bal. 180 180
210 290
225

Instructions
Determine the correct amount of the end-of-month posting from the sales journal to the
Accounts Receivable control account.
Compute balances in various E7-14B Selected account balances for Toby Mac Company at January 1, 2008, are presented
accounts. below.
(SO 4)
Accounts Payable $22,000
Accounts Receivable 29,000
Cash 20,000
Inventory 18,000
Toby Mac’s sales journal for January shows a total of $120,000 in the selling price column,
and its one-column purchases journal for January shows a total of $83,000.
The column totals in Toby Mac’s cash receipts journal are: Cash Dr. $81,000; Sales Discounts
Dr. $2,000; Accounts Receivable Cr. $50,000; Sales Cr. $12,000; and Other Accounts Cr. $17,000.
The column totals in Toby Mac’s cash payments journal for January are: Cash Cr. $70,000;
Inventory Cr. $2,000; Accounts Payable Dr. $58,000; and Other Accounts Dr. $13,000.
Matisyahu’s total cost of goods sold for January is $80,000.
Accounts Payable, Accounts Receivable, Cash, Inventory, and Sales are not involved in the
“Other Accounts” column in either the cash receipts or cash payments journal, and are not in-
volved in any general journal entries.
Instructions
Compute the January 31 balance for Toby Mac in the following accounts.
(a) Accounts Payable.
(b) Accounts Receivable.
(c) Cash.
(d) Inventory.
(e) Sales.

PROBLEMS: SET C
Journalize transactions in cash
receipts journal; post to control
account and subsidiary ledger.
(SO 2, 3, 4)
P7-1C Kentucky Company’s chart of accounts includes the following selected accounts.
101 Cash 401 Sales
112 Accounts Receivable 414 Sales Discounts
120 Merchandise Inventory 505 Cost of Goods Sold
301 Ken Tucky Capital
On June 1 the accounts receivable ledger of Kentucky Company showed the following balances:
Moose & Son $3,500, Chris Co. $2,800, Cornell Bros. $2,400, and Marx Co. $2,000. The June
transactions involving the receipt of cash were as follows.
June 1 The owner, Ken Tucky, invested additional cash in the business $12,000.
3 Received check in full from Marx Co. less 2% cash discount.
6 Received check in full from Chris Co. less 2% cash discount.
7 Made cash sales of merchandise totaling $8,700. The cost of the merchandise sold was
$5,000.
9 Received check in full from Moose & Son less 2% cash discount.
11 Received cash refund from a supplier for damaged merchandise $450.
 Problems: Set C 59
15 Made cash sales of merchandise totaling $6,500. The cost of the merchandise sold was
$4,000.
20 Received check in full from Cornell Bros. $2,400.
Instructions
(a) Journalize the transactions above in a six-column cash receipts journal with columns for (a) Balancing totals $38,350
Cash Dr., Sales Discounts Dr., Accounts Receivable Cr., Sales Cr., Other Accounts Cr., and
Cost of Goods Sold Dr./Merchandise Inventory Cr. Foot and crossfoot the journal.
(b) Insert the beginning balances in the Accounts Receivable control and subsidiary accounts,
and post the June transactions to these accounts.
(c) Prove the agreement of the control account and subsidiary account balances. (c) Accounts Receivable $0

P7-2C Starr Company’s chart of accounts includes the following selected accounts. Journalize transactions in cash
payments journal; post to the
101 Cash 157 Equipment general and subsidiary ledgers.
120 Merchandise Inventory 201 Accounts Payable
(SO 2, 3, 4)
130 Prepaid Insurance 306 R. Starr, Drawing
On November 1 the accounts payable ledger of Starr Company showed the following balances:
P. McCartney $4,000, J. Lennon $2,100, G. Harrison $800, and J. Lynne $1,300. The November
transactions involving the payment of cash were as follows.
Nov. 1 Purchased merchandise, check no. 11, $950.
3 Purchased store equipment, check no. 12, $1,400.
5 Paid J. Lynne balance due of $1,300, less 1% discount, check no. 13, $1,287.
11 Purchased merchandise, check no. 14, $1,700.
15 Paid G. Harrison balance due of $800, less 3% discount, check no. 15, $776.
16 R. Starr, the owner, withdrew $400 cash for own use, check no. 16.
19 Paid J. Lennon in full for invoice no. 1245, $2,100 less 2% discount, check no. 17, $2,058.
25 Paid premium due on one-year insurance policy, check no. 18, $2,400.
30 Paid P. McCartney in full for invoice no. 832, $2,900, check no. 19.
Instructions
(a) Journalize the transactions above in a four-column cash payments journal with columns for (a) Balancing totals $13,950
Other Accounts Dr., Accounts Payable Dr., Merchandise Inventory Cr., and Cash Cr. Foot
and crossfoot the journal.
(b) Insert the beginning balances in the Accounts Payable control and subsidiary accounts, and
post the November transactions to these accounts.
(c) Prove the agreement of the control account and the subsidiary account balances. (c) Accounts Payable $1,100

P7-3C The chart of accounts of Dickinson Company includes the following selected accounts. Journalize transactions in
multi-column purchases
112 Accounts Receivable 401 Sales
journal; post to the general and
120 Merchandise Inventory 412 Sales Returns and Allowances subsidiary ledgers.
126 Supplies 505 Cost of Goods Sold
(SO 2, 3, 4)
157 Equipment 610 Advertising Expense
201 Accounts Payable
In May the following selected transactions were completed. All purchases and sales were on ac-
count except as indicated. The cost of all merchandise sold was 60% of the sales price.
May 2 Purchased merchandise from Older Company $5,000.
3 Received freight bill from Fast Freight on Older purchase $250.
5 Sales were made to May Company $1,300, Coen Bros. $1,800, and Lucy Company $1,000.
8 Purchased merchandise from Wolfe Company $5,400 and Zig Company $3,000.
10 Received credit on merchandise returned to Zig Company $350.
15 Purchased supplies from Michelle’s Supplies $600.
16 Purchased merchandise from Older Company $3,100, and Wolfe Company $4,800.
17 Returned supplies to Michelle’s Supplies, receiving credit $70. (Hint: Credit Supplies.)
18 Received freight bills on May 16 purchases from Fast Freight $325.
20 Returned merchandise to Older Company receiving credit $200.
23 Made sales to Coen Bros. $1,600 and to Lucy Company $2,500.
25 Received bill for advertising from Ole Advertising $620.
26 Granted allowance to Lucy Company for merchandise damaged in shipment $140.
28 Purchased equipment from Michelle’s Supplies $400.
60 Chapter 7 Accounting Information Systems

(a) Purchases journal— Instructions

Accounts Payable, Cr. (a) Journalize the transactions above in a purchases journal, a sales journal, and a general
$23,495
journal. The purchases journal should have the following column headings: Date,
Sales column total
$8,200 Account Credited (Debited), Ref., Accounts Payable Cr., Merchandise Inventory Dr., and
(c) Accounts Receivable Other Accounts Dr.
$8,060 (b) Post to both the general and subsidiary ledger accounts. (Assume that all accounts have zero
Accounts Payable beginning balances.)
$22,875 (c) Prove the agreement of the control and subsidiary accounts.
Journalize transactions in P7-4C Selected accounts from the chart of accounts of Valente Company are shown below.
special journals.
(SO 2, 3, 4) 101 Cash 201 Accounts Payable
112 Accounts Receivable 401 Sales
120 Merchandise Inventory 414 Sales Discounts
126 Supplies 505 Cost of Goods Sold
140 Land 610 Advertising Expense
145 Buildings

The cost of all merchandise sold was 65% of the sales price. During October, Valente Company
completed the following transactions.
Oct. 2 Purchased merchandise on account from Janet Company $12,000.
4 Sold merchandise on account to Erik Co. $5,600. Invoice no. 204, terms 2/10, n/30.
5 Purchased supplies for cash $60.
7 Made cash sales for the week totaling $6,700.
9 Paid in full the amount owed Janet Company less a 2% discount.
10 Purchased merchandise on account from Arduino Corp. $2,600.
12 Received payment from Erik Co. for invoice no. 204.
13 Returned $150 worth of damaged goods purchased on account from Arduino Corp. on
October 10.
14 Made cash sales for the week totaling $6,000.
16 Sold a parcel of land for $20,000 cash, the land’s original cost.
17 Sold merchandise on account to Ed’s Warehouse $3,900, invoice no. 205, terms 2/10,
n/30.
18 Purchased merchandise for cash $1,600.
21 Made cash sales for the week totaling $6,000.
23 Paid in full the amount owed Arduino Corp. for the goods kept (no discount).
25 Purchased supplies on account from Paul Martin Co. $190.
25 Sold merchandise on account to David Corp. $3,800, invoice no. 206, terms 2/10,
n/30.
25 Received payment from Ed’s Warehouse for invoice no. 205.
26 Purchased for cash a small parcel of land and a building on the land to use as a storage
facility. The total cost of $26,000 was allocated $16,000 to the land and $10,000 to the
building.
27 Purchased merchandise on account from Mary Co. $6,200.
28 Made cash sales for the week totaling $5,500.
30 Purchased merchandise on account from Janet Company $10,000.
30 Paid advertising bill for the month from the Gazette, $290.
30 Sold merchandise on account to Ed’s Warehouse $3,400, invoice no. 207, terms 2/10,
n/30.

Valente Company uses the following journals.

1. Sales journal.
2. Single-column purchases journal.
3. Cash receipts journal with columns for Cash Dr., Sales Discounts Dr., Accounts
Receivable Cr., Sales Cr., Other Accounts Cr., and Cost of Goods Sold Dr./Merchandise
Inventory Cr.
4. Cash payments journal with columns for Other Accounts Dr., Accounts Payable Dr.,
Merchandise Inventory Cr., and Cash Cr.
5. General journal.
 Problems: Set C 61

Instructions (b) Sales journal $16,700

Using the selected accounts provided: Purchases journal
(a) Record the October transactions in the appropriate journals. $30,800
Cash receipts journal—
(b) Foot and crossfoot all special journals. Cash, Dr. $53,510
(c) Show how postings would be made by placing ledger account numbers and check marks as Cash payments journal,
needed in the journals. (Actual posting to ledger accounts is not required.) Cash, Cr. $42,160

P7-5C Presented below are the sales and cash receipts journals for Wicked Co. for its first Journalize in purchases and
month of operations. cash payments journals; post;
prepare a trial balance; prove
control to subsidiary; prepare
adjusting entries; prepare an
adjusted trial balance.
(SO 2, 3, 4)

SALES JOURNAL S1
Accounts Receivable Dr. Cost of Goods Sold Dr.
Date Account Debited Ref. Sales Cr. Merchandise Inventory Cr.
Feb. 3 C. Lion 4,000 2,400
9 S. Crow 5,000 3,000
12 T. Mann 6,500 3,900
26 W. Oz 5,500 3,300
21,000 12,600

CASH RECEIPTS JOURNAL CR1

Sales Accounts Other
Cash Discounts Receivable Sales Accounts Cost of Goods Sold Dr.
Date Account Credited Ref. Dr. Dr. Cr. Cr. Cr. Merchandise Inventory Cr.
Feb. 1 B. Wicked, Capital 23,000 23,000
2 4,500 4,500 2,700
13 C. Lion 3,960 40 4,000
18 Merchandise Inventory 120 120
26 S. Crow 5,000 5,000
36,580 40 9,000 4,500 23,120 2,700

In addition, the following transactions have not been journalized for February 2008.
Feb. 2 Purchased merchandise on account from J. Garland for $3,600, terms 2/10, n/30.
7 Purchased merchandise on account from B. Lahr for $23,000, terms 1/10, n/30.
9 Paid cash of $980 for purchase of supplies.
12 Paid $3,528 to J. Garland in payment for $3,600 invoice, less 2% discount.
15 Purchased equipment for $5,500 cash.
16 Purchased merchandise on account from D. Gale $1,900, terms 2/10, n/30.
17 Paid $22,770 to B. Lahr in payment of $23,000 invoice, less 1% discount.
20 B. Wicked withdrew cash of $800 from business for personal use.
21 Purchased merchandise on account from Kansas Company for $6,000, terms 1/10, n/30.
28 Paid $1,900 to D. Gale in payment of $2,400 invoice.
Instructions
(a) Open the following accounts in the general ledger.
101 Cash 301 B. Wicked, Capital
112 Accounts Receivable 306 B. Wicked, Drawing
120 Merchandise Inventory 401 Sales
126 Supplies 414 Sales Discounts
157 Equipment 505 Cost of Goods Sold
158 Accumulated Depreciation—Equipment 631 Supplies Expense
201 Accounts Payable 711 Depreciation Expense
62 Chapter 7 Accounting Information Systems

(b) Purchases journal total (b) Journalize the transactions that have not been journalized in a one-column purchases jour-
$34,500 nal and the cash payments journal (see Illustration 7-16).
Cash payments journal—
(c) Post to the accounts receivable and accounts payable subsidiary ledgers. Follow the sequence
Cash, Cr. $35,478
of transactions as shown in the problem.
(e) Totals $54,500
(d) Post the individual entries and totals to the general ledger.
(f) Accounts Receivable
(e) Prepare a trial balance at February 28, 2008.
$12,000
Accounts Payable $6,000 (f) Determine that the subsidiary ledgers agree with the control accounts in the general ledger.
(g) The following adjustments at the end of February are necessary.
(1) A count of supplies indicates that $200 is still on hand.
(2) Depreciation on equipment for February is $150.
Prepare the adjusting entries and then post the adjusting entries to the general ledger.
(h) Totals $54,650 (h) Prepare an adjusted trial balance at February 28, 2008.