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Unformatted text preview: CHAPTER 7 Accounting Information Systems ASSIGNMENT CLASSIFICATION TABLE Study Objectives 1. Identify the basic principles of accounting information systems. Explain the major phases in the development of an accounting system. Describe the nature and purpose of a subsidiary ledger. Explain how special journals are used in journalizing. Indicate how a multicolumn journal is posted. Questions 1, 2, 3 Brief Exercises 1 Exercises A Problems B Problems 2. 4 2 3. 5, 6, 9, 11, 16 3, 4 1, 2, 3, 4, 5, 7, 9, 10 1A, 2A, 3A, 4A, 5A, 6A 1B, 2B, 3B, 4B, 5B 4. 7, 8, 10, 11, 12, 13, 14, 15, 17 12, 16 5, 6, 8, 9 4, 5, 6, 7, 8, 10 1A, 2A, 3A, 4A, 5A, 6A 1B, 2B, 3B, 4B, 5B 5. 7 1, 3, 7, 9, 11 1A, 2A, 3A, 4A, 5A, 6A 1B, 2B, 3B, 4B, 5B 7-1 ASSIGNMENT CHARACTERISTICS TABLE Problem Number 1A Description Journalize transactions in cash receipts journal and post to control account and subsidiary ledger. Journalize transactions in cash payments journal and post to the general and subsidiary ledgers. Journalize transactions in multi-column purchases journal and post to the general and subsidiary ledgers. Journalize transactions in special journals. Journalize in purchases and cash payments journals, post; prepare a trial balance; prove control to subsidiary; prepare adjusting entries, and prepare an adjusted trial balance. Journalize in special journals, post, and prepare a trial balance. Journalize transactions in cash receipts journal and post to control account and subsidiary ledger. Journalize transactions in cash payments journal and post to the general and subsidiary ledgers. Journalize transactions in multi-column purchases journal and post to the general and subsidiary ledgers. Journalize transactions in special journals. Journalize in sales and cash receipts journals, post; prepare a trial balance; prove control to subsidiary; prepare adjusting entries; and prepare an adjusted trial balance. Difficulty Level Simple Time Allotted (min.) 30-40 2A Simple 30-40 3A Moderate 40-50 4A 5A Moderate Moderate 50-60 60-70 6A Complex 60-70 1B Simple 30-40 2B Simple 30-40 3B Moderate 40-50 4B 5B Moderate Moderate 50-60 60-70 7-2 Correlation Chart between Bloom's Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems Knowledge Q7-1 Q7-2 Q7-4 BE7-2 Q7-5 Q7-6 Q7-9 Q7-16 BE7-3 BE7-4 E7-2 E7-9 E7-1 E7-3 E7-4 E7-5 E7-7 E7-10 P7-1A P7-2A P7-3A P7-4A P7-5A P7-6A P7-1B Q7-11 P7-2B P7-3B P7-4B P7-5B Q7-3 BE7-1 Comprehension Application Analysis Synthesis Evaluation Study Objective 1. Identify the basic principles of accounting information systems. 2. Explain the major phases in the development of an accounting system. BLOOM'S TAXONOMY TABLE 3. Describe the nature and purpose of a subsidiary ledger. 4. Explain how special journals are used in journalizing. 7-3 Q7-12 Q7-16 BE7-7 E7-9 Exploring the Web E7-1 E7-3 E7-7 E7-11 P7-1A Q7-7 Q7-8 Q7-10 Q7-12 Q7-13 Q7-14 Q7-15 P7-2A P7-3A P7-4A P7-5A P7-6A Q7-17 BE7-5 BE7-6 BE7-8 BE7-9 E7-6 E7-8 E7-1 E7-4 E7-5 E7-10 P7-1A P7-2A P7-3A P7-4A P7-5B Q7-11 P7-5A P7-6A P7-1B P7-2B P7-3B P7-4B P7-1B P7-2B P7-3B P7-4B P7-5B Financial Reporting (Mini Practice Case) Group Decision Communication Ethics Case 5. Indicate how a multi-column journal is posted. Broadening Your Perspective ANSWERS TO QUESTIONS 1. (a ) An ac c ount ing inf o rmat ion sy s t em inv ol v es coll ec t i ng and proc e s s in g da t a and dis s e mina t ing fin anc i al inf or mat i on. (b ) Di s agr ee. An ac c ou nt in g in f orm at io n sy s t em app lies reg ardl es s of whet h er manua l or c o mput er iz ed pro c edu res are us ed to proc es s the tran s ac t ion dat a . There are three principles for developing an accounting information system: Co st awar e ness . Th e sy s t em mus t be cos t -ef f ec t iv e; tha t is , th e be nef i t s obt ai ned from the in f orm at i on dis s e mina t ed mus t out weig h th e co s t of pr ov id ing it . Us eful out put. To be us ef ul, inf o rmat ion mus t be unde rs t a ndab le, rele v ant , re liab le, time ly , an d ac c ura t e. Fl exib i li t y. Th e sy s t em sho uld be able to ac commoda t e a variety of us er s an d ch angi ng inf orma t ion nee ds . 3. Co s t aware nes s --The sy s t em mus t be c o s t -e f f ec t iv e ; th at is , the benef it s obt a ined fro m th e in f orm atio n di s sem inat ed mus t out w eigh the cos t of prov iding it . In th is cas e, the cos t ap pear s t o out weig h th e be nef i t s . The phases of an accounting system are: Analysis, which involves planning and identifying information needs and sources. Design, which includes creating forms, documents, procedures, job descriptions, and reports. I m pl em enta ti on , whic h con s is t s of ins t all ing the sy s t em, trai ning per s onn el, and mak i ng the s y s t e m wh olly ope rat i onal . Foll ow-up, which involves ev aluat ing and monitoring eff ec tiv enes s and ef ficienc y and correc ting any weaknes ses . 5. A subs idiary ledger is a group of ac c ount s wit h a common charact eris tic . The ac c ount s are as s embled toget her to fac ilitat e the ac c ount ing proc es s by freeing the general ledger from det ails c onc erning indiv idual balanc es . The advant ages of us ing subs idiary ledgers are that they : Pe rmit tra ns ac t ion s af f ec t ing a si ngle cus t ome r or sin gle cred it or to be shown in a si ngle ac c oun t , thus prov idin g ne c es s ary up-t o-da t e inf or mat i on on sp ec if ic ac c ou nt balan c es . Fr ee the gener al ledge r of ex c ess i v e detai ls relat ing to ac c ou nt s rece iv ab le and ac c ou nt s pa y abl e. As a res u lt , a tr ial bala nc e of the gener al ledge r do es not cont a in pot en t ial ly t h ous a nds and thous a nds of indiv idua l ac c oun t ba lanc es . As s is t in loc a t ing err ors in indiv idua l ac c oun t s by re duc i ng the numbe r of ac c ount s co mbi ned in one ledge r an d by us i ng cont r olli ng ac c ou nt s . Pe rmit a div is ion of labor in pos t ing by hav in g on e em ploy ee pos t to the gener al ledge r an d (a ) di f f e rent emp loy e e(s ) pos t to the sub s idi ary ledg ers . 6. (a) (1) Individual transactions are generally posted daily to the subsidiary ledger. (2 ) I n con t ras t , pos t i ngs to the cont r ol ac c ou nt s are us ua lly made in tot a l at the end of t h e mo nt h. (b ) A cont rol ac c o unt is a gen eral led ger ac c o unt that sum mari z es subs idia ry ledge r da t a. Su bs id iary led ger ac c o unt s kee p tr ac k of spec i f ic ac c o unt ac t i v it y (i. e. , spec if ic deb t ors or cre dit o rs ). A subs i diar y le dger is an addit ion to, and an ex pan s ion of , the gen eral le dger . 2. 4. 7-4 Questions Chapter 7 (Continued) 7. Sales journal. Records entries for all sales of merchandise on account. Cash receipts journal. Records entries for all cash received by the business. Purchases journal. Records entries for all purchases of merchandise on account. Cash payments journal. Records entries for all cash paid. Some advantages of each journal are given below: Sales journal. (1) Sin c e the sales jou rnal emp loy s onl y on e column to rec ord an Ac c oun t s Re ceiv able deb it and a Sales credit , it s use reduc es rec or ding tim e; (2) the credi t to Sales is onl y pos ted onc e an ac c ount ing peri od; and (3) the journal' s us e separa tes res pons i bilit i es bet we en emplo y ees . Ca s h rec ei pt s jour nal. (1) It s us e aid s in the pos t ing pro c es s sin c e the tot al s fo r Ca s h, Sa les Dis c ount s , Ac c ou nt s Rec e iv ab le, and Sale s ar e al l re c ord ed in th e ge nera l le dger on ly at the end of the mon th; and (2) it allow s all ac c oun t s rec eiv able cr edit s to be post ed t o the app ropr iat e su bs id iary led ger ac c o unt s dai ly . Pu rc ha s es jour nal. The adv ant a ges are simi lar to thos e of the sale s jo urna l ex c ept tha t it ems inv o lv ed are Mer c han dis e Inv ent o ry debit s an d Ac c oun t s Pay ab le credi t s . Cash payments journal. Similar advantages to cash receipts journal except the columns involved are different. I n gen eral, sp ecia l jo urna ls : (1) allow gr eat e r di v is ion of la bor bec aus e vari ous indi vidu als can rec o rd ent ri es in di f f er ent jour nals at the same tim e; and (2) reduc e po s t in g ti me of jo urna ls . 8. The ent ry for the sales return should be rec orded in the general journal. Sinc e Tom Wetz el Company has a single-c olumn sales journal, only credit sales can be recorded there. A purchas e by Tom Wet z el Company has not taken plac e, so the us e of the purc has es journal is inappropriat e. Finally , no cash is rec eived or paid, so neither the cas h receipts or cash pay ment s journal should be us ed. At the end of the mont h, af t er all pos t ing s to bot h th e ge nera l le dger and the sub s idi ary ac c o unts hav e be en made, the tot al of the su bs id iary acc ount bal ance s should equal the balanc e of the con t rol ac c ount in the gene ral ledg er. In this cas e , th e co nt ro l ac c oun t ba lanc e wi ll be $4 50 large r th an the tot al of the subs idia ry ac c ou nt s . The purpos e of spec ial journals is to fac ilitat e the rec ording proc ess of the busines s ent it y. Theref ore, the columns inc luded in any spec ial journal should corres pond to the unique needs of the ent ity . In particular, one type of bus ines s whic h might not require an Acc ount s Receiv able c olumn would be groc ery st ores . Thes e bus iness es rarely sell on credit to their cus t omers . The minimum frequenc y of the trans action implies no need for an Ac count s Rec eivable column in the c ash rec eipt s journal. (a ) No, th e cust omers' ledger will not agree with the Acc ounts Rec eiv able cont rol acc ount. The c u s t om ers ' led ger will be pos t ed corre c t ly , bu t th e Ac c oun t s Rec ei v abl e co nt ro l ac c oun t wi ll be in c orr ec t . (b ) Th e tr ial bala nc e will bal anc e , al t hou gh Cas h will be $4, 0 00 too high and Ac c o unt s Rec e iv ab le $4, 00 0 to o lo w. Th e sp ecia l jo urna l is the sal es journ al. The ot her ac c oun t is Sal es . (The cas h re c eip t s journ al is an inc o rrec t an s wer bec aus e the re would be more tha n tw o mo nt h- end pos t ings to gene ral le dger ac c o unt s . ) 9. 10. 11 . 12 . 7-5 Questions Chapter 7 (Continued) 13. (a) (b) (c) (a) (b) (c) General journal. General journal. Cash receipts journal. Cash receipts journal. Cash receipts journal. General journal. (d) (e) (f) (d) (e) (f) Sales journal. Cash receipts journal. General journal. Purchases journal. General journal. Cash payments journal. 14. 15 . Ty pica lly incl uded wou ld be credit purc has es of eq uipment, of f ic e supp lies , an d st or e su ppli es . Ho wev e r, any ot her it em pu rcha s ed on credi t co uld also be inc l uded in a sp ec ial co lumn or the "o t her " co lumn . On e su c h ex amp le is a purc has e ret urn. Her e th e Ac c oun t s Pay ab le cont r ol and subs i diar y ac coun t mus t be debit e d fo r the sa me amoun t. The debit /c re dit equa lit y is unaf f ec t ed sinc e the ba lanc e sheet equa tion is comp uted us ing gener al ledge r (c ont r ol) ac co unt s only . The subs idiar y ac c oun t s shoul d pr ov e to the cont r ol ac c ou nt balan c e. Th e ge nera l jo urna l ma y be us e d to rec ord suc h tran s ac t ions as the gran t ing of cred it to a c u st omer for a sales retur n or all owan ce, the rec eipt of credit fr om a supplie r fo r purc ha s es ret u rned , ac c ept an c e of a not e rec eiv a ble from a cus t o mer, or the purc has e of a pl ant as s e t by is s uin g a not e pay able . In add it io n, all corre c t in g, adjus t ing , an d cl os in g en t rie s sh ould be ma de in th e ge nera l jo urna l. 16 . 17 . 7-6 SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 7-1 1. 2. 3. True False True BRIEF EXERCISE 7-2 1. 2. Analysis Follow-up 3. Design 4. Implementation BRIEF EXERCISE 7-3 Accounts Receivable Subsidiary Ledger Date Jan. 7 17 Ref. Duffy Co. Debit Credit 8,000 7,000 Balance 8,000 1,000 Date Jan. 31 31 General Ledger Accounts Receivable Ref. Debit Credit 23,000 20,000 Balance 23,000 3,000 Date Jan. 15 24 Hanson Co. Ref. Debit Credit 6,000 4,000 Lewis Co. Debit Credit 9,000 9,000 Balance 6,000 2,000 Date Jan. 23 29 Ref. Balance 9,000 0 BRIEF EXERCISE 7-4 1. 2. General ledger Subsidiary ledger 3. General ledger 4. Subsidiary ledger 7-7 BRIEF EXERCISE 7-5 1. 2. 3. Cash Receipts Journal Cash Payments Journal Cash Payments Journal 4. Sales Journal 5. Purchases Journal 6. Cash Receipts Journal BRIEF EXERCISE 7-6 1. 2. No Yes 3. Yes 4. No BRIEF EXERCISE 7-7 1. 2. Both in total and daily In total 3. In total 4. Only daily BRIEF EXERCISE 7-8 1. 2. 3. 4. General Journal (if a one-column Purchases Journal) Purchases Journal (if a columnar Purchases Journal) Purchases Journal Cash Payments Journal Sales Journal BRIEF EXERCISE 7-9 1. 2. 3. 4. 5. Cash Receipts Journal Cash Receipts Journal Cash Receipts Journal Sales Journal or Cash Receipts Journal Purchases Journal or Cash Payments Journal 7-8 SOLUTIONS TO EXERCISES EXERCISE 7-1 (a) $340,400. Beginning balance of $320,000 plus $161,400 debit from sales journal less $141,000 credit from cash receipts journal. (b) $95,900. Beginning balance of $87,000 plus $56,400 credit from purchases journal less $47,500 debit from cash payments journal. (c) The column total of $1 61,4 00 in the sa les jour nal woul d be posted to the cr edit side of the Sales account and the debit side of the Accounts Rece ivable account in the genera l ledger . (d) The ac counts recei vabl e column total of $1 41,0 00 in the ca sh recei pts journa l would be posted to the credit side of the Accounts Rec eivable account in the gener al ledge r. EXERCISE 7-2 To: From: Subject: Barb Murphy Student Nathan Ross account The explanation of the three entries in the subsidiary ledger for the Nathan Ross account is as follows: Sept. 2 Sept. 9 Sept. 27 This was a credit sale of merchandise to Ross. The entry was recorded on page 31 of the Sales Journal. This was a sales return or allowance granted to Ross. The entry was recorded on page 4 of the General Journal. This was a payment by Ross of the balance due. The entry was recorded on page 8 of the Cash Receipts Journal. If I can be of further help, please let me know. 7-9 EXERCISE 7-3 (a) & (b) Accounts Receivable Date Sept. 1 Explanation Balance Ref. S CR G Debit 4,190 7,030 220 Credit Balance 11,960 16,150 9,120 8,900 General Ledger Accounts Receivable Subsidiary Ledger Jana Date Sept. 1 Explanation Balance Ref. S CR Debit 1,260 Credit 1,240 Balance 2,440 3,700 2,460 Kingston Date Sept. 1 Explanation Balance Ref. CR Debit Credit 1,800 Balance 2,640 840 Iman Date Sept. Explanation 1 Ref. S CR Debit 1,030 Credit 380 Balance 1,030 650 Cavanaugh Date Explanation Sept. 1 Balance Ref. S CR Debit 1,100 Credit 1,310 Balance 2,060 3,160 1,850 7-10 EXERCISE 7-3 (Continued) Bickford Date Sept. 1 Explanation Balance Ref. S CR G Debit 800 2,300 220 Credit Balance 4,820 5,620 3,320 3,100 (c) WELTER COMPANY Schedule of Customers As of September 30, 2005 Jana .............................................................................................. Kingston....................................................................................... Iman.............................................................................................. Cavanaugh................................................................................... Bickford........................................................................................ Total...................................................................................... Accounts Receivable.................................................................. $2,460 840 650 1,850 3,100 $8,900 $8,900 EXERCISE 7-4 (a) & (b) SING TAO COMPANY Sales Journal S1 Date Account Debited Invoice Accounts Receivable Dr. Cost of Goods Sold Dr. No. Ref. Sales Cr. Merchandise Inventory Cr. 101 102 520 800 1,320 300 480 780 2005 Sept. 2 T. Mephisto 21 P. Shinhan 7-11 EXERCISE 7-4 (Continued) SING TAO COMPANY Purchases Journal P1 Merchandise Inventory Dr. Accounts Payable Cr. 600 810 1,410 Date 2005 Sept. 10 25 Account Credited L. Fantasia W. Manion Terms 2/10, n/30 n/30 Ref. EXERCISE 7-5 (a) & (b) SVENSKA CO. Cash Receipts Journal CR1 Account Credited Cash Dr. 60,000 6,300 9,000 75,300 Cost of Goods Sold Sales Accounts Other Dr. Discounts Receivable Sales Accounts Merchandise Inventory Dr. Cr. Cr. Cr. Cr. 60,000 9,000 9,000 6,300 0,000 6,300 00,000 60,000 4,200 0,000 4,200 Date Ref. 2005 May 1 I. Svenska, Cap. 2 22 M. Irish SVENSKA CO. Cash Payments Journal CP1 Ck. No. 101 102 Other Accounts Accounts Payable Ref. Dr. Dr. 8,200 700 8,900 Cash Cr. 8,200 700 8,900 Date 2005 May 3 14 Account Debited Merchandise Inventory Salary Expense 7-12 EXERCISE 7-6 (a) Journal 1. Cash Payments 2. Cash Receipts 3. Cash Payments 4. Cash Payments 5. 6. 7. 8. 9. 10. Cash Receipts Cash Payments Cash Payments Cash Receipts Cash Payments Cash Receipts (b) Columns in the journal Cash (Cr.), Other Accounts (Dr.). Cash (Dr.), Sales Discounts (Dr.), and Accounts Receivable (Cr.). Cash (Cr.), Merchandise Inventory (Dr.). Cash (Cr.), Merchandise Inventory (Cr.), and Accounts Payable (Dr.). Cash (Dr.), Accounts Receivable (Cr.). Cash (Cr.), Other Accounts (Dr.). Cash (Cr.), Other Accounts (Dr.). Cash (Dr.), Other Accounts (Cr.). Cash (Cr.), Other Accounts (Dr.). Cash (Dr.), Sales (Cr.), Cost of Goods Sold (Dr.), and Merchandise Inventory (Cr.). EXERCISE 7-7 (a) Mar. 2 Equipment....................................................... Accounts Payable--Chile Company ............................................. Accounts Payable--Lyden Company ..................................................... Merchandise Inventory .......................... Sales Returns and Allowances ..................... Accounts Receivable--Higley Company ............................................. Merchandise Inventory .................................. Cost of Goods Sold ................................ 7,400 7,400 410 410 400 400 260 260 5 7 7-13 EXERCISE 7-7 (Continued) (b) To: From: Subject: President Argentina Chief Accountant Posting of Control and Subsidiary Accounts The posting of these accounts varies with the journals used in recording the transactions. Sa les and purchase s journa ls--the total for the month is posted to the control accounts. The individual entrie s ar e posted dai ly to the subsidiar y ac counts. Columnar cash receipts and cash payments journals--the total of the control account column for the month is posted to the control account. The individual amounts in the column are posted daily to the subsidiary accounts. Genera l journa l--the indivi dual entries are posted dail y. Each entr y that perta ins to a control and a subsi diar y ac count is dua lposted. That is, it is posted to both the control account and the subsidiary account. I hope this memo answers your questions about posting. EXERCISE 7-8 1. 2. 3. 4. 5. 6. 7. Cash Payments Journal General Journal Cash Receipts Journal Cash Receipts Journal Sales Journal Cash Receipts Journal General Journal 8. 9. 10. 11. 12. 13. Cash Receipts Journal Cash Payments Journal General Journal General Journal Cash Payments Journal Purchases Journal 7-14 EXERCISE 7-9 (a) The debit posting reference on February 28 should be from the cash payments journal to record the payments made during the month. The general ledger debit amount should be $29,140 to balance. Fernando's ending balance must be $3,300. (Accounts Payable control balance of $10,200 less Perez, $4,600, and Lucia, $2,300.) (b) Only the general journal amounts were dual posted. Thus, the amounts were $1,400 (Dr.), $265 (Cr.), and $550 (Cr.). EXERCISE 7-10 (a) Purchases Journal P1 Merchandise Inventory Dr. Accounts Payable Cr. 2,400 500 1,100 1,400 700 600 2,100 8,800 120/201 Date July 3 12 14 17 20 21 29 Account Credited Brian Co. Erik Co. Dan Co. Colleen Corp. Brian Co. Erik Co. Colleen Corp. Ref. 7-15 EXERCISE 7-10 (Continued) (b) Date July General Journal Accounts and Explanations Store Equipment............................. Accounts Payable--Adam Equipment Co. .................... Ref. 153/ 201/ Debit 3,900 Credit 1 3,900 15 Merchandise Inventory .................. 120/ 400 Accounts Payable--Grace Inc......................................... 201/ 400 (This entry should have been recorded in the Purchases Journal.) Accounts Payable--Colleen Corp. ............................................ Merchandise Inventory........... Accounts Payable--Dan Co. ......... Merchandise Inventory........... 201/ 120/ 201/ 120/ 100 100 200 200 18 25 EXERCISE 7-11 $9 75 ($200 + $290 + $1 45 + $19 0 + $150). All of the debit post ings to the subsidiary ledger accounts should be from sale s invoic es. The tota l of all these debi ts shoul d therefore be the total credit sales for the month, which would be the same amount as the end-of-month debit to Accounts Receivab le. 7-16 SOLUTIONS TO PROBLEMS PROBLEM 7-1A (a) Cash Receipts Journal CR1 Account Credited Cash Dr. Sales Accounts Discounts Receivable Dr. Cr. Sales Cr. Cost of Goods Sold Other Dr. Accounts Merchandise Inventory Cr. Cr. 10,000 26 38 70 1,300 1,900 6,135 3,500 320 4,800 134 (414) 1,600 8,300 (112) 10,935 (401) 10,320 (X) 3,200 7,290 (505/120) 4,090 Date June 1 3 6 7 9 11 15 20 Ref. J. Lewis, 301 10,000 Capital 1,274 Maquoketa Co. 1,862 Farley Co. 6,135 3,430 Bernard & Son Merchandise 320 120 Inventory 4,800 Grinnell Bros. 1,600 29,421 (101) (b) Accounts Receivable Date Explanation June 1 Balance 30 General Ledger No. 112 Balance 8,300 0 Ref. CR1 Debit Credit 8,300 Accounts Receivable Subsidiary Ledger Bernard & Son Date June 1 9 Explanation Balance Ref. CR1 Debit Credit 3,500 Balance 3,500 0 7-17 PROBLEM 7-1A (Continued) Farley Co. Date June 1 6 Explanation Balance Ref. CR1 Debit Credit 1,900 Balance 1,900 0 Grinnell Bros. Date Explanation June 1 Balance 20 Maquoketa Co. Date Explanation June 1 Balance 3 Ref. CR1 Debit Credit 1,600 Balance 1,600 0 Ref. CR1 Debit Credit 1,300 Balance 1,300 0 (c) Accounts receivable balance = 0. Sum of all subsidiary accounts = 0. 7-18 PROBLEM 7-2A (a) Cash Payments Journal CP1 Other Accounts Accounts Payable Dr. Dr. 1,140 1,700 1,900 120 306 130 0, 8,340 (X) 2,000 1,000 500 1,150 3,000 2,800 6,850 (201) 00 72 (120) 23 30 19 Merchandise Inventory Cr. Date Nov. 1 3 5 11 15 16 19 25 30 Ck. No. 11 12 13 14 15 16 17 18 19 Account Debited Merch. Inventory Equipment Wex Bros. Merch. Inventory G. Saeman B. Congo, Drawing C. Pillsbury Prepaid Insurance A. Hess & Co. Ref. 120 157 Cash Cr. 1,140 1,700 1,881 2,000 970 500 1,127 3,000 2,800 15,118 (101) (b) Accounts Payable Date Explanation Nov. 1 Balance 30 General Ledger No. 201 Balance 9,750 2,900 Ref. CP1 Debit 6,850 Credit Accounts Payable Subsidiary Ledger A. Hess & Co. Date Nov. 1 30 Explanation Balance Ref. CP1 Debit 2,800 Credit Balance 4,500 1,700 7-19 PROBLEM 7-2A (Continued) C. Pillsbury Date Nov. 1 19 Explanation Balance Ref. CP1 Debit 1,150 Credit Balance 2,350 1,200 G. Saeman Date Explanation Nov. 1 Balance 15 Wex Bros. Date Explanation Nov. 1 Balance 5 Ref. CP1 Debit 1,000 Credit Balance 1,000 0 Ref. CP1 Debit 1,900 Credit Balance 1,900 0 (c) Accounts payable balance: Subsidiary account balances: A. Hess & Co. C. Pillsbury $2,900 $1,700 1,200 $2,900 7-20 PROBLEM 7-3A (a) Purchases Journal P1 Other Merchandise Accounts Accounts Inventory Payable Dr. Dr. Cr. 9,500 360 8,000 8,700 126/ 900 4,500 7,200 500 610/ 157/ 900 250 2,050 (X) 38,760 (120) 9,500 360 8,000 8,700 900 4,500 7,200 500 900 0 250 40,810 (201) Date May 2 3 8 8 15 16 16 18 25 28 Account Credited (Debited) Van Houk Company Ruden Freight Tulip Company Zeider Company Sandvoort Supply (Supplies) Van Houk Company Tulip Company Ruden Freight Amster Advertising (Adv. Exp.) Sandvoort Supply (Equipment) Ref. Sales Journal S1 Date May 5 5 5 23 23 Account Debited Ellie Company Cornelis Bros. Jan Company Cornelis Bros. Jan Company Ref. Accounts Receivable Dr. Cost of Goods Sold Dr. Sales Cr. Merchandise Inventory Cr. 1,980 2,700 1,500 2,400 3,100 11,680 (112)(401) 1,287 1,755 975 1,560 2,015 7,592 (505)(120) 7-21 PROBLEM 7-3A (Continued) General Journal Date May 10 Accounts and Explanations Accounts Payable--Zeider Company ....................................... Merchandise Inventory............. Accounts Payable--Sandvoort Supply............................................ Supplies ..................................... Accounts Payable--Van Houk Company ....................................... Merchandise Inventory............. Sales Returns and Allowances ....... Accounts Receivable-- Jan Company ........................ Ref. 201/ 120/ Debit 500 500 Credit 17 201/ 126/ 100 100 20 201/ 120/ 412/ 112/ 300 300 200 200 26 (b) Accounts Receivable Date May 31 26 Explanation General Ledger No. 112 Ref. S1 G1 Debit 11,680 Credit 200 Balance 11,680 11,480 No. 120 Balance 38,760 38,260 37,960 30,368 Merchandise Inventory Date Explanation May 31 10 20 31 Ref. P1 G1 G1 S1 Debit 38,760 Credit 500 300 7,592 7-22 PROBLEM 7-3A (Continued) Supplies Date May 15 17 Explanation Ref. P1 G1 Debit 900 Credit 100 No. 126 Balance 900 800 No. 157 Balance 250 No. 201 Balance 40,810 40,310 40,210 39,910 No. 401 Balance 11,680 No. 412 Balance 200 No. 505 Balance 7,592 No. 610 Balance 900 Equipment Date Explanation May 28 Accounts Payable Date Explanation May 31 10 17 20 Sales Date May 31 Ref. P1 Debit 250 Credit Ref. P1 G1 G1 G1 Debit 500 100 300 Credit 40,810 Explanation Ref. S1 Debit Credit 11,680 Sales Returns and Allowances Date Explanation May 26 Cost of Goods Sold Date Explanation May 31 Advertising Expense Date Explanation May 25 Ref. G1 Debit 200 Credit Ref. S1 Debit 7,592 Credit Ref. P1 Debit 900 Credit 7-23 PROBLEM 7-3A (Continued) Accounts Receivable Subsidiary Ledger Ellie Company Date May 5 Explanation Ref. S1 Debit 1,980 Credit Balance 1,980 Cornelis Bros. Date Explanation May 5 23 Jan Company Date May 5 23 26 Explanation Ref. S1 S1 Debit 2,700 2,400 Credit Balance 2,700 5,100 Ref. S1 S1 G1 Debit 1,500 3,100 Credit 200 Balance 1,500 4,600 4,400 Accounts Payable Subsidiary Ledger Ruden Freight Date Explanation May 3 18 Van Houk Company Date May 2 16 20 Explanation Ref. P1 P1 G1 Debit Credit 9,500 4,500 Balance 9,500 14,000 13,700 Ref. P1 P1 Debit Credit 360 500 Balance 360 860 300 7-24 PROBLEM 7-3A (Continued) Sandvoort Supply Date May 15 17 28 Explanation Ref. P1 G1 P1 Debit 100 250 Credit 900 Balance 900 800 1,050 Tulip Company Date May 8 16 Explanation Ref. P1 P1 Debit Credit 8,000 7,200 Balance 8,000 15,200 Zeider Company Date Explanation May 8 10 Amster Advertising Date Explanation May 25 Ref. P1 G1 Debit 500 Credit 8,700 Balance 8,700 8,200 Ref. P1 Debit Credit 900 Balance 900 (c) Accounts receivable balance.................................... Subsidiary account balances Ellie Company .................................................... Cornelis Bros...................................................... Jan Company...................................................... Total ............................................................. Accounts payable balance........................................ $1,980 5,100 4,400 $11,480 $11,480 $39,910 7-25 PROBLEM 7-3A (Continued) Subsidiary account balances Ruden Freight................................................... Van Houk Company ......................................... Sandvoort Supply ............................................ Tulip Company ................................................. Zeider Company............................................... Amster Advertising.......................................... Total........................................................... $ 860 13,700 1,050 15,200 8,200 900 $39,910 7-26 PROBLEM 7-4A (a), (b) & (c) Sales Journal S1 Date Oct. 4 17 25 30 Account Debited Drew Co. G. Paltrow & Co. Hunt Corp. G. Paltrow & Co. Invoice Accounts Receivable Dr. Cost of Goods Sold Dr. No. Ref. Sales Cr. Merchandise Inventory Cr. 204 205 206 207 8,700 5,350 5,220 4,600 23,870 (112)(401) 6,090 3,745 3,654 3,220 16,709 (505)(120) Purchases Journal P1 Merchandise Inventory Dr. Accounts Payable Cr. 18,500 3,500 8,500 14,000 44,500 (120)(201) General Journal Date Oct. 13 Accounts and Explanations Accounts Payable--Diez Corp............................................... Merchandise Inventory............ Supplies ............................................ Accounts Payable--Robinson Co. ......................................... Ref. 201/ 120/ 126/ 201/ Debit 210 210 260 260 G1 Credit Date Oct. 2 10 27 30 Account Credited Angelina Company Diez Corp. Kudro Co. Angelina Company Ref. 25 7-27 PROBLEM 7-4A (Continued) Cash Receipts Journal CR1 Account Credited Drew Co. Land G. Paltrow & Co. 140 Cash Dr. 9,160 8,526 8,180 27,000 8,200 Sales Accounts Discounts Receivable Dr. Cr. 174 8,700 8,180 27,000 8,200 5,350 00, 14,050 (112) 5,740 5,726 Sales Cr. 9,160 Cost of Goods Sold Other Dr. Accounts Merchandise Inventory Cr. Cr. 6,412 Date Oct. 7 12 14 16 21 25 28 Ref. 5,243 107 8,540 000 74,849 281 (101) (414) 8,540 34,080 (401) 27,000 (X) 5,978 23,856 (505)(120) Cash Payments Journal CP1 Other Accounts Dr. 80 18,500 120 140 145 610 2,125 3,290 21,000 14,000 400 37,605 (X) 00,000 21,790 (201) 000 370 (120) 370 Accounts Payable Dr. Merchandise Inventory Cr. Cash Cr. 80 18,130 2,125 3,290 35,000 400 59,025 (101) Date Oct. 5 9 18 23 26 30 Account Debited Supplies Angelina Co. Merchandise Inventory Diez Corp. Land Building Advertising Expense Ref. 126 7-28 PROBLEM 7-5A (b) Purchases Journal P1 Merchandise Inventory Dr. Accounts Payable Cr. 4,600 30,000 2,400 5,800 42,800 (120)(201) Cash Payments Journal CP1 Other Accounts Dr. 1,250 4,600 157 306 8,000 30,000 1,100 00,000 10,350 (X) 2,400 37,000 (201) 300 000 392 (120) 92 Accounts Payable Dr. Merchandise Inventory Cr. Cash Cr. 1,250 4,508 8,000 29,700 1,100 2,400 46,958 (101) Date Feb. 2 7 16 21 Account Credited J. Zea P. Kneiser J. Lakota G. Reedy Ref. Date Feb. 9 12 15 17 20 28 Account Debited Supplies J. Zea Equipment P. Kneiser A. Zamtel, Drawing J. Lakota Ref. 126 (a), (d) & (g) Cash Date Feb. 28 28 Explanation General Ledger No. 101 Ref. CR1 CP1 Debit 48,595 Credit 46,958 Balance 48,595 1,637 7-29 PROBLEM 7-5A (Continued) Accounts Receivable Date Feb. 28 28 Explanation Ref. S1 CR1 Debit 26,000 Credit 12,000 No. 112 Balance 26,000 14,000 No. 120 Balance 42,800 42,650 42,258 25,098 20,808 No. 126 Balance 1,250 300 No. 157 Explanation Ref. CP1 Debit 8,000 Credit Balance 8,000 No. 158 Balance 200 No. 201 Balance 42,800 5,800 Merchandise Inventory Date Explanation Feb. 28 18 28 28 28 Supplies Date Feb. 9 28 Equipment Date Feb. 15 Ref. P1 CR1 CP1 S1 CR1 Debit 42,800 Credit 150 392 17,160 4,290 Explanation Adjusting entry Ref. CP1 G1 Debit 1,250 Credit 950 Accumulated Depreciation--Equipment Date Explanation Ref. Feb. 28 Adjusting entry G1 Accounts Payable Date Explanation Feb. 28 28 Debit Credit 200 Ref. P1 CP1 Debit 37,000 Credit 42,800 7-30 PROBLEM 7-5A (Continued) A. Zamtel, Capital Date Feb. Explanation 1 Ref. CR1 Debit Credit 30,000 No. 301 Balance 30,000 No. 306 Balance 1,100 No. 401 Balance 26,000 32,500 No. 414 Balance 55 No. 505 Ref. S1 CR1 Debit 17,160 4,290 Credit Balance 17,160 21,450 No. 631 Ref. G1 Debit 950 Credit Balance 950 No. 711 Balance 200 A. Zamtel, Drawing Date Explanation Feb. 20 Sales Date Feb. 28 28 Ref. CP1 Debit 1,100 Credit Explanation Ref. S1 CR1 Debit Credit 26,000 6,500 Sales Discounts Date Explanation Feb. 28 Cost of Goods Sold Date Feb. 28 28 Explanation Ref. CR1 Debit 55 Credit Supplies Expense Date Feb. 28 Explanation Adjusting entry Depreciation Expense Date Explanation Feb. 28 Adjusting entry Ref. G1 Debit 200 Credit 7-31 PROBLEM 7-5A (Continued) (c) S. Appel Date Feb. Explanation 3 13 Ref. S1 CR1 Debit 5,500 Credit 5,500 Balance 5,500 0 Accounts Receivable Subsidiary Ledger F. Catt Date Feb. 12 C. Boyd Date Feb. Explanation Ref. S1 Debit 8,000 Credit Balance 8,000 Explanation 9 26 Ref. S1 CR1 Debit 6,500 Credit 6,500 Balance 6,500 0 M. Dogg Date Feb. 26 Explanation Ref. S1 Debit 6,000 Credit Balance 6,000 Accounts Payable Subsidiary Ledger G. Reedy Date Explanation Feb. 21 J. Zea Date Feb. 2 12 Ref. P1 Debit Credit 5,800 Balance 5,800 Explanation Ref. P1 CP1 Debit 4,600 Credit 4,600 Balance 4,600 0 7-32 PROBLEM 7-5A (Continued) P. Kneiser Date Feb. Explanation 7 17 Ref. P1 CP1 Debit 30,000 Credit 30,000 Balance 30,000 0 J. Lakota Date Explanation Feb. 16 28 Ref. P1 CP1 Debit 2,400 Credit 2,400 Balance 2,400 0 (e) ZAMTEL CO. Trial Balance February 28, 2005 Cash....................................................................... Accounts Receivable ........................................... Merchandise Inventory ........................................ Supplies ................................................................ Equipment............................................................. Accounts Payable ................................................ A. Zamtel, Capital ................................................. A. Zamtel, Drawing............................................... Sales ...................................................................... Sales Discounts ................................................... Cost of Goods Sold.............................................. Debit $ 1,637 14,000 20,808 1,250 8,000 1,100 32,500 55 21,450 $68,300 000,000 $68,300 Credit $ 5,800 30,000 7-33 PROBLEM 7-5A (Continued) (f) Accounts Receivable control account ................. Accounts Receivable subsidiary accounts F. Catt ............................................................... M. Dogg ............................................................ Accounts Payable control account....................... Accounts Payable subsidiary account G. Reedy .......................................................... $8,000 6,000 $14,000 $14,000 $5,800 $5,800 (g) Date Feb. 28 28 General Journal Accounts and Explanations Supplies Expense............................. Supplies..................................... Depreciation Expense...................... Accumulated Depreciation-- Equipment ............................. Ref. 631 126 711 158 Debit 950 200 200 G1 Credit 950 7-34 PROBLEM 7-5A (Continued) (h) ZAMTEL CO. Adjusted Trial Balance February 28, 2005 Cash....................................................................... Accounts Receivable ........................................... Merchandise Inventory ........................................ Supplies ................................................................ Equipment............................................................. Accumulated Depreciation--Equipment ........... Accounts Payable ................................................ A. Zamtel, Capital ................................................. A. Zamtel, Drawing............................................... Sales ...................................................................... Sales Discounts ................................................... Cost of Goods Sold.............................................. Supplies Expense ................................................ Depreciation Expense.......................................... Debit $ 1,637 14,000 20,808 300 8,000 Credit $ 1,100 200 5,800 30,000 32,500 55 21,450 950 200 $68,500 000,000 $68,500 7-35 PROBLEM 7-6A (b) & (c) Cash Receipts Journal CR1 Cash Dr. 3,500 3,920 9,100 40,000 56,520 (101) Sales Discounts Dr. 80 00 80 (414) Accounts Receivable Cr. 3,500 4,000 0,000 7,500 (112) 9,100 0,000 9,100 (401) 40,000 40,000 (X) 5,460 0,000 5,460 (505)(120) Sales Cr. Other Accounts Cr. Cost of Goods Sold Dr. Merchandise Inventory Cr. Date Jan. 7 13 23 29 Account Credited T. Dudley M. Sanford Notes Receivable Ref. 115 Cash Payments Journal CP1 Date Jan. 11 12 15 18 18 27 Account Debited Merchandise Inventory Rent Expense K. Hollis Sales Salaries Expense Office Salaries Expense E. Westphal Other Accounts Merchandise Accounts Payable Inventory Ref. Dr. Dr. Cr. 120 729 726 727 300 1,000 15,000 2,800 1,500 0,000 5,600 (X) 150 Cash Cr. 300 1,000 14,850 2,800 1,500 950 21,400 (101) 950 15,950 (201) 000 150 (120) Sales Journal S1 Date Account Debited Ref. Accounts Receivable Dr. Sales Cr. 4,000 7,400 11,400 (112)(401) Cost of Goods Sold Dr. Merchandise Inventory Cr. 2,400 4,440 6,840 (505)(120) Jan. 3 M. Sanford 24 F. Cone 7-36 PROBLEM 7-6A (Continued) Purchases Journal P1 Merchandise Inventory Dr. Accounts Payable Cr. 3,000 1,600 4,600 (120)(201) General Journal Date Jan. 14 Accounts and Explanations Sales Returns and Allowances....... Accounts Receivable-- J. Balton ................................ Merchandise Inventory.................... ($500 X .60) Cost of Goods Sold.................. Accounts Payable--D. Goodman... Notes Payable........................... Accounts Payable--G. Louis.......... Merchandise Inventory ............ Ref. /412 /112 /120 /505 /201 /200 /201 /120 18,000 18,000 500 500 Debit 500 300 300 G1 Credit Date Jan. 5 17 Account Credited E. Westphal G. Louis Ref. 500 20 30 (a) & (c) General Ledger Cash Date Jan. 1 31 31 Explanation Balance Ref. CR1 CP1 Debit 56,520 21,400 Credit No. 112 Balance 41,500 98,020 76,620 7-37 PROBLEM 7-6A (Continued) Accounts Receivable Date Jan. 1 14 31 31 Explanation Balance Ref. G1 CR1 S1 Debit Credit 500 7,500 11,400 No. 112 Balance 15,000 14,500 7,000 18,400 Notes Receivable Date Explanation Jan. 1 Balance 29 Ref. CR1 Debit Credit 40,000 No. 115 Balance 45,000 5,000 Merchandise Inventory Date Jan. 1 11 14 30 31 31 31 31 Explanation Balance Ref. CP1 G1 G1 P1 CP1 CR1 S1 Debit 300 300 500 4,600 150 5,460 6,840 Credit No. 120 Balance 23,000 23,300 23,600 23,100 27,700 27,550 22,090 15,250 Equipment Date Explanation Jan. 1 Balance Ref. Debit Credit No. 157 Balance 6,450 Accumulated Depreciation--Equipment Date Jan. 1 Explanation Balance Ref. Debit Credit No. 158 Balance 1,500 7-38 PROBLEM 7-6A (Continued) Notes Payable Date Jan. 20 Explanation Ref. G1 Debit Credit 18,000 No. 200 Balance 18,000 Accounts Payable Date Explanation Jan. 1 Balance 20 30 31 31 Ref. G1 G1 P1 CP1 Debit 18,000 500 Credit 4,600 15,950 No. 201 Balance 43,000 25,000 24,500 29,100 13,150 B. Dazzle, Capital Date Jan. 1 Explanation Balance Ref. Debit Credit No. 301 Balance 86,450 Sales Date Jan. 31 31 Explanation Ref. CR1 S1 Debit Credit 9,100 11,400 No. 401 Balance 9,100 20,500 Sales Returns and Allowances Date Jan. 14 Explanation Ref. G1 Debit 500 Credit No. 412 Balance 500 Sales Discounts Date Explanation Jan. 31 Ref. CR1 Debit 80 Credit No. 414 Balance 80 7-39 PROBLEM 7-6A (Continued) Cost of Goods Sold Date Jan. 31 31 14 Explanation Ref. CR1 S1 G1 Debit 5,460 6,840 Credit No. 505 Balance 5,460 12,300 12,000 No. 726 Ref. CP1 Debit 2,800 Credit Balance 2,800 No. 727 Balance 1,500 No. 729 Balance 1,000 300 Sales Salaries Expense Date Jan. 18 Explanation Office Salaries Expense Date Explanation Jan. 18 Rent Expense Date Explanation Jan. 12 Ref. CP1 Debit 1,500 Credit Ref. CP1 Debit 1,000 Credit Accounts Receivable Subsidiary Ledger J. Balton Date Jan. 1 14 F. Cone Date Jan. 1 24 Explanation Balance Ref. S1 Debit 7,400 Credit Balance 7,500 14,900 Explanation Balance Ref. G1 Debit Credit 500 Balance 2,500 2,000 7-40 PROBLEM 7-6A (Continued) T. Dudley Date Jan. 1 7 Explanation Balance Ref. CR1 Debit Credit 3,500 Balance 5,000 1,500 M. Sanford Date Explanation Jan. 3 13 Ref. S1 CR1 Debit 4,000 Credit 4,000 Balance 4,000 0 Accounts Payable Subsidiary Ledger G. Louis Date Jan. 17 30 Explanation Ref. P1 G1 Debit 500 Credit 1,600 Balance 1,600 1,100 J. Feeney Date Explanation Jan. 1 Balance D. Goodman Date Explanation Jan. 1 Balance 20 K. Hollis Date Jan. 1 15 Ref. Debit Credit Balance 10,000 Ref. G1 Debit 18,000 Credit Balance 18,000 0 Explanation Balance Ref. CP1 Debit 15,000 Credit Balance 15,000 0 7-41 PROBLEM 7-6A (Continued) E. Westphal Date Jan. Explanation 5 27 Ref. P1 CP1 Debit 950 Credit 3,000 Balance 3,000 2,050 (d) BEDAZZLE CO. Trial Balance January 31, 2005 Cash .................................................................. Accounts Receivable....................................... Notes Receivable ............................................. Merchandise Inventory.................................... Equipment ........................................................ Accumulated Depreciation--Equipment ....... Notes Payable .................................................. Accounts Payable ............................................ B. Dazzle, Capital ............................................. Sales.................................................................. Sales Returns and Allowances....................... Sales Discounts ............................................... Cost of Goods Sold ......................................... Sales Salaries Expense................................... Office Salaries Expense .................................. Rent Expense ................................................... Debit $ 76,620 18,400 5,000 15,250 6,450 $ Credit 1,500 18,000 13,150 86,450 20,500 500 80 12,000 2,800 1,500 1,000 $139,600 0000,000 $139,600 (e) Accounts Receivable Subsidiary Ledger J. Balton .............................................................................. F. Cone ................................................................................ T. Dudley ............................................................................. Accounts Receivable Control................................................... $ 2,000 14,900 1,500 $18,400 $18,400 7-42 PROBLEM 7-6A (Continued) Accounts Payable Subsidiary Ledger G. Louis .............................................................................. J. Feeney ............................................................................ E. Westphal ........................................................................ Accounts Payable Control ....................................................... $ 1,100 10,000 2,050 $13,150 $13,150 7-43 PROBLEM 7-1B (a) Cash Receipts Journal CR1 Account Credited Cash Dr. 7,200 1,372 620 7,245 600 740 1,500 1,200 20,477 (101) Cost of Goods Sold Sales Accounts Other Dr. Discounts Receivable Sales Accounts Merchandise Inventory Dr. Cr. Cr. Cr. Cr. 7,200 28 1,400 620 7,245 600 740 00 28 (414) 1,500 1,200 5,320 (112) 0,000 7,245 (401) 0,000 7,940 (X) 0,000 4,347 (505)(120) 4,347 Date Ref. 301 Apr. 1 O. Iqbal, Capital 4 Baez 5 Finlandia Co. 8 10 Naper 11 Merchandise Inventory 23 Finlandia Co. 29 Chelsea 120 (b) Accounts Receivable Date Apr. 1 30 Explanation Balance General Ledger No. 112 Ref. CR1 Debit Credit 5,320 Balance 7,050 1,730 Accounts Receivable Subsidiary Ledger Naper Date Apr. 1 10 Explanation Balance Ref. CR1 Debit Credit 600 Balance 1,550 950 7-44 PROBLEM 7-1B (Continued) Chelsea Date Apr. 1 29 Explanation Balance Ref. CR1 Debit Credit 1,200 Balance 1,200 0 Finlandia Co. Date Explanation Apr. 1 Balance 5 23 Baez Date Apr. 1 4 Ref. CR1 CR1 Debit Credit 620 1,500 Balance 2,900 2,280 780 Explanation Balance Ref. CR1 Debit Credit 1,400 Balance 1,400 0 (c) Accounts receivable balance: Subsidiary account balances: Naper Finlandia Co. Total $1,730 $ 950 780 $1,730 7-45 PROBLEM 7-2B (a) Cash Payments Journal CP1 Other Accounts Merchandise Accounts Payable Inventory Ref. Dr. Dr. Cr. 120 157 120 306 300 800 1,700 2,250 1,800 400 0,000 3,750 (X) 1,600 3,100 8,200 (201) 32 00 66 (120) 34 Date Oct. 1 3 5 10 15 16 19 29 Ck. No. Account Debited 63 64 65 66 67 68 69 70 Merch. Inventory Equipment Bovary Co. Merch. Inventory Pyron Co. T. Mann, Drawing Magic Co. Tess Co. Cash Cr. 300 800 1,666 2,250 1,800 400 1,568 3,100 11,884 (101) (b) Accounts Payable Date Explanation Oct. 1 Balance 31 General Ledger No. 201 Balance 9,700 1,500 Ref. CP1 Debit 8,200 Credit Accounts Payable Subsidiary Ledger Bovary Co. Date Oct. 1 5 Explanation Balance Ref. CP1 Debit 1,700 Credit Balance 1,700 0 7-46 PROBLEM 7-2B (Continued) Magic Co. Date Oct. 1 19 Pyron Date Oct. 1 15 Tess Co. Date Oct. 1 29 Explanation Balance Ref. CP1 Debit 1,600 Credit Balance 2,500 900 Explanation Balance Ref. CP1 Debit 1,800 Credit Balance 1,800 0 Explanation Balance Ref. CP1 Debit 3,100 Credit Balance 3,700 600 (c) Accounts payable balance: Subsidiary account balances: Magic Co. Tess Co. $1,500 $ 900 600 $1,500 7-47 PROBLEM 7-3B (a) Purchases Journal P1 Other Merchandise Accounts Accounts Inventory Payable Dr. Dr. Cr. 5,000 400 3,200 126/ 720 3,600 3,300 610/ 157/ 600 3,000 600 0,000 1,920 (X) 380 18,880 (120) 5,000 400 3,200 720 3,600 3,300 600 3,000 600 380 20,800 (201) Date July 1 2 5 13 15 15 18 24 26 28 Account Credited (Debited) Gucci Company Wayward Shipping Lee Company Boyd Supply (Supplies) Gucci Company Anton Company Lynda Advertisement (Advertising Expense) Lee Company Boyd Supply (Equipment) Wayward Shipping Ref. Sales Journal S1 Date July 3 3 16 16 21 21 30 Account Debited Marion Company Wayne Bros. Rowen Company Wayne Bros. Marion Company Haddad Company Rowen Company Accounts Receivable Dr. Cost of Goods Sold Dr. Ref. Sales Cr. Merchandise Inventory Cr. 1,300 1,500 3,450 1,570 310 2,300 5,600 16,030 (112)(401) 910 1,050 2,415 1,099 217 1,610 3,920 11,221 (505)(120) 7-48 PROBLEM 7-3B (Continued) General Journal Date July Accounts and Explanations Accounts Payable--Lee Company ...................................... Merchandise Inventory............ Sales Returns and Allowances Accounts Receivable-- Marion Company.................. Ref. 201/ 120/ 412/ 112/ Debit 300 300 40 40 G1 Credit 8 22 (b) Accounts Receivable Date Explanation July 31 22 General Ledger No. 112 Balance 16,030 15,990 Ref. S1 G1 Debit 16,030 Credit 40 Merchandise Inventory Date July 31 8 31 Explanation Ref. P1 G1 S1 Debit 18,880 Credit 300 11,221 No. 120 Balance 18,880 18,580 7,359 Supplies Date July 13 Explanation Ref. P1 Debit 720 Credit No. 126 Balance 720 7-49 PROBLEM 7-3B (Continued) Equipment Date July 26 Explanation Ref. P1 Debit 600 Credit No. 157 Balance 600 Accounts Payable Date Explanation July 31 8 Ref. P1 G1 Debit 300 Credit 20,800 No. 201 Balance 20,800 20,500 Sales Date July 31 Explanation Ref. S1 Debit Credit 16,030 No. 401 Balance 16,030 Sales Returns and Allowances Date Explanation July 22 Ref. G1 Debit 40 Credit No. 412 Balance 40 Cost of Goods Sold Date Explanation July 31 Ref. S1 Debit 11,221 Credit No. 505 Balance 11,221 Advertising Expense Date July 18 Explanation Ref. P1 Debit 600 Credit No. 610 Balance 600 7-50 PROBLEM 7-3B (Continued) Accounts Receivable Subsidiary Ledger Wayne Bros. Date July Explanation 3 16 Ref. S1 S1 Debit 1,500 1,570 Credit Balance 1,500 3,070 Marion Company Date Explanation July 3 21 22 Ref. S1 S1 G1 Debit 1,300 310 Credit 40 Balance 1,300 1,610 1,570 Rowen Company Date Explanation July 16 30 Ref. S1 S1 Debit 3,450 5,600 Credit Balance 3,450 9,050 Haddad Company Date Explanation July 21 Ref. S1 Debit 2,300 Credit Balance 2,300 Accounts Payable Subsidiary Ledger Boyd Supply Date July 13 26 Explanation Ref. P1 P1 Debit Credit 720 600 Balance 720 1,320 7-51 PROBLEM 7-3B (Continued) Wayward Shipping Date July Explanation 2 28 Ref. P1 P1 Debit Credit 400 380 Balance 400 780 Gucci Company Date Explanation July 1 15 Ref. P1 P1 Debit Credit 5,000 3,600 Balance 5,000 8,600 Lee Company Date Explanation July 5 8 24 Ref. P1 G1 P1 Debit 300 Credit 3,200 3,000 Balance 3,200 2,900 5,900 Lynda Advertisements Date Explanation July 18 Ref. P1 Debit Credit 600 Balance 600 Anton Company Date Explanation July 15 Ref. P1 Debit Credit 3,300 Balance 3,300 7-52 PROBLEM 7-3B (Continued) (c) Accounts receivable balance.................................. Subsidiary account balances Wayne Bros....................................................... Marion Company .............................................. Rowen Company .............................................. Haddad Company............................................. Total ........................................................... Accounts payable balance...................................... Subsidiary account balances Boyd Supply ..................................................... Wayward Shipping ........................................... Gucci Company................................................ Lee Company.................................................... Lynda Advertisements..................................... Anton Company ............................................... Total ........................................................... $ 1,320 780 8,600 5,900 600 3,300 $20,500 $ 3,070 1,570 9,050 2,300 $15,990 $20,500 $15,990 7-53 PROBLEM 7-4B (a), (b) & (c) Sales Journal S1 Date Account Debited Invoice Accounts Receivable Dr. Cost of Goods Sold Dr. No. Ref. Sales Cr. Merchandise Inventory Cr. 371 372 373 374 7,250 6,400 1,200 9,330 24,180 (112)(401) 4,350 3,840 720 5,598 14,508 (505)(120) Jan. 4 Niki 9 Connor Corp. 17 Andrews Co. 31 Niki Purchases Journal P1 Merchandise Inventory Dr. Accounts Payable Cr. 12,000 4,500 3,700 7,800 5,100 33,100 (120)(201) General Journal Date Jan. 5 Accounts and Explanations Accounts Payable--Vanessa Co. Merchandise Inventory .................... Equipment ......................................... Accounts Payable--Murphy Corp........................................ Ref. 201/ 120 157/ 201/ Debit 300 G1 Credit 300 5,500 5,500 Date Jan. 3 8 11 23 24 Account Credited Vanessa Co. Marti Co. Betz Co. Vanessa Co. Forgetta Corp. Ref. 19 7-54 PROBLEM 7-4B (Continued) Cash Receipts Journal CR1 Account Credited Cash Dr. 3,150 6,260 6,336 7,250 3,200 3,730 1,200 31,126 (101) Sales Accounts Discounts Receivable Dr. Cr. Sales Cr. 3,150 6,260 64 6,400 7,250 3,200 3,730 00,000 16,340 (401) 1,920 2,238 0,000 9,804 (505)(120) Cost of Goods Sold Other Dr. Accounts Merchandise Inventory Cr. Cr. 1,890 3,756 Date Ref. Jan. 6 13 15 Connor Corp. 17 Niki 20 27 30 Andrews Co. 00 64 (414) 1,200 14,850 (112) 0 0 (X) Cash Payments Journal CP1 Other Accounts Accounts Payable Dr. Dr. 80 11,700 726 726 14,300 13,200 27,580 (X) 4,500 00,000 16,200 (201) 90 000 324 (120) 234 Merchandise Inventory Cr. Cash Cr. 80 11,466 14,300 4,410 13,200 43,456 (101) Date Jan. 4 13 15 20 31 Account Debited Supplies Vanessa Co. Salaries Expense Marti Co. Salaries Expense Ref. 126 7-55 PROBLEM 7-5B (a), (d) & (g) Cash Date July 31 31 General Ledger No. 101 Balance 99,035 59,969 No. 112 Balance 18,700 4,000 No. 120 Balance 42,020 41,600 41,366 29,211 26,611 No. 127 Balance 600 140 No. 131 Balance 6,000 5,500 Explanation Ref. CR1 CP1 Debit 99,035 Credit 39,066 Accounts Receivable Date Explanation July 31 31 Merchandise Inventory Date Explanation July 31 29 31 31 31 Store Supplies Date Explanation July 4 31 Adjusting entry Prepaid Rent Date Explanation July 11 31 Adjusting entry Ref. S1 CR1 Debit 18,700 Credit 14,700 Ref. P1 CR1 CP1 S1 CR1 Debit 42,020 Credit 420 234 12,155 2,600 Ref. CP1 G1 Debit 600 Credit 460 Ref. CP1 G1 Debit 6,000 Credit 500 7-56 PROBLEM 7-5B (Continued) Accounts Payable Date July 31 31 Explanation Ref. P1 CP1 Debit 30,200 Credit 42,020 No. 201 Balance 42,020 11,820 Scott, Capital Date Explanation July 1 Ref. CR1 Debit Credit 80,000 No. 301 Balance 80,000 Scott, Drawing Date July 19 Explanation Ref. CP1 Debit 2,500 Credit No. 306 Balance 2,500 Sales Date July 31 31 Explanation Ref. S1 CR1 Debit Credit 18,700 4,000 No. 401 Balance 18,700 22,700 Sales Discounts Date July 31 Explanation Ref. CR1 Debit 85 Credit No. 414 Balance 85 Cost of Goods Sold Date Explanation July 31 31 Ref. S1 CR1 Debit 12,155 2,600 Credit No. 505 Balance 12,155 14,755 7-57 PROBLEM 7-5B (Continued) Supplies Expense Date July 31 Explanation Adjusting entry Ref. G1 Debit 460 Credit No. 631 Balance 460 No. 729 Balance 500 Rent Expense Date Explanation July 31 Adjusting entry Ref. G1 Debit 500 Credit (b) Sales Journal S1 Accounts Receivable Dr. Cost of Goods Sold Dr. Sales Cr. Merchandise Inventory Cr. 6,200 3,600 4,900 4,000 18,700 (112)(401) 4,030 2,340 3,185 2,600 12,155 (505)(120) Date July 6 8 10 21 Account Debited Dopey Co. S. Beauty W. Queen H. Prince Ref. Cash Receipts Journal CR1 Account Credited Scott, Capital S. Beauty W. Queen Dopey Co. Merchandise Inventory Cash Dr. Cost of Goods Sold Sales Accounts Other Dr. Discounts Receivable Sales Accounts Merchandise Inventory Dr. Cr. Cr. Cr. Cr. 80,000 4,000 36 49 3,600 4,900 6,200 00,000 14,700 (112) 0,000 4,000 (401) 420 80,420 (X) 0,000 2,600 (505)(120) 2,600 Date July 1 7 13 16 20 29 Ref. 301 80,000 4,000 3,564 4,851 6,200 120 420 99,035 (101) 00 85 (414) 7-58 PROBLEM 7-5B (Continued) (c) C. Sleepy Date July 13 21 A. Doc Date July 5 10 Explanation Ref. P1 CP1 Debit 15,300 Credit 15,300 Balance 15,300 0 Accounts Payable Subsidiary Ledger Explanation Ref. P1 CP1 Debit 8,100 Credit 8,100 Balance 8,100 0 M. Sneezy Date Explanation July 20 G. Bashful Date Explanation July 4 15 J. Happy Date July 11 Ref. P1 Debit Credit 7,900 Balance 7,900 Ref. P1 CP1 Debit 6,800 Credit 6,800 Balance 6,800 0 Explanation Ref. P1 Debit Credit 3,920 Balance 3,920 Accounts Receivable Subsidiary Ledger Dopey Co. Date Explanation July 6 20 Ref. S1 CR1 Debit 6,200 Credit 6,200 Balance 6,200 0 7-59 PROBLEM 7-5B (Continued) H. Prince Date July 21 Explanation Ref. S1 Debit 4,000 Credit Balance 4,000 W. Queen Date Explanation July 10 16 S. Beauty Date July Explanation 8 13 Ref. S1 CR1 Debit 4,900 Credit 4,900 Balance 4,900 0 Ref. S1 CR1 Debit 3,600 Credit 3,600 Balance 3,600 0 (e) SCOTT CO. Trial Balance July 31, 2005 Cash .................................................................. Accounts Receivable....................................... Merchandise Inventory.................................... Store Supplies.................................................. Prepaid Rent..................................................... Accounts Payable ............................................ Scott, Capital .................................................... Scott, Drawing.................................................. Sales.................................................................. Sales Discounts ............................................... Cost of Goods Sold ......................................... Debit $ 59,969 4,000 26,611 600 6,000 2,500 22,700 85 14,755 $114,520 0000,000 $114,520 Credit $ 11,820 80,000 7-60 PROBLEM 7-5B (Continued) (f) Accounts payable balance....................................................... Subsidiary accounts balance M. Sneezy ........................................................................... J. Happy ............................................................................. Accounts receivable balance................................................... Subsidiary accounts balance H. Prince............................................................................. $11,820 $ 7,900 3,920 $11,820 $4,000 $4,000 (g) General Journal G1 Date July 31 31 Accounts and Explanations Supplies Expense............................ Store Supplies.......................... Rent Expense................................... Prepaid Rent............................. Ref. 631 127 729 131 Debit 460 500 500 Credit 460 7-61 PROBLEM 7-5B (Continued) (h) SCOTT CO. Adjusted Trial Balance July 31, 2005 Cash .................................................................. Accounts Receivable....................................... Merchandise Inventory.................................... Store Supplies.................................................. Prepaid Rent..................................................... Accounts Payable ............................................ Scott, Capital .................................................... Scott, Drawing.................................................. Sales.................................................................. Sales Discounts ............................................... Cost of Goods Sold ......................................... Supplies Expense ............................................ Rent Expense ................................................... Debit $ 59,969 4,000 26,611 140 5,500 2,500 22,700 85 14,755 460 500 $114,520 Credit $ 11,820 80,000 $114,520 7-62 COMPREHENSIVE PROBLEM: CHAPTERS 3 TO 7 Note: If the working papers that accompany this text are not used in solving this problem, account numbers may differ from those presented in this solution. (a) Sales Journal S1 Accounts Receivable Dr. Sales Cr. 3,100 1,800 1,900 900 1,700 800 3,500 6,100 19,800 (112)(401) Date Jan. 3 3 11 11 22 22 25 25 Account Debited B. Soto J. Ebel R. Draves S. Kysely B. Soto R. Draves B. Jacovetti J. Ebel Invoice No. 510 511 512 513 514 515 516 517 Ref. Purchases Journal P1 Date Jan. 5 5 16 16 16 27 27 27 Account Credited S. Welz D. Laux D. Nguyen S. Liazuk S. Welz D. Nguyen D. Laux S. Welz Terms Ref. Purchases Dr. Accounts Payable Cr. 3,000 2,700 15,000 13,900 1,500 14,500 1,200 2,800 54,600 (510)(201) 7-63 COMPREHENSIVE PROBLEM (Continued) Cash Receipts Journal CR1 Account Credited S. Kysely B. Jacovetti B. Soto J. Ebel S. Kysely Cash Dr. 4,000 2,000 15,500 3,100 1,500 17,500 900 19,920 64,420 (101) Accounts Receivable Cr. 4,000 2,000 15,500 3,100 1,500 17,500 900 00,000 11,500 (112) 19,920 52,920 (401) Sales Cr. Other Accounts Cr. Date Jan. 7 7 10 13 13 20 21 31 Explanation Collection in full Partial collection Cash Sales Collection in full Collection in full Cash Sales Collection in full Cash Sales Ref. Cash Payments Journal CP1 Date Jan. 8 9 9 12 15 17 23 23 28 31 31 Explanation Pay freight Pay in full Pay in full Pay rent Withdraw Cash Purchase Supplies Pay in full Pay in full Purchase Supplies Pay Salaries Pay Salaries Cash Cr. 180 9,000 11,000 1,000 800 400 15,000 13,700 200 4,300 2,600 58,180 (101) Accounts Payable Dr. 9,000 11,000 Office Supplies Dr. Accounts Debited Freight In S. Liazuk D. Nguyen Rent Expense I. Raymond, Drawing 400 15,000 13,700 200 00,000 48,700 (201) 000 600 (125) Sales Salaries Expense Office Salaries Expense 627 727 4,300 2,600 8,880 (X) D. Nguyen S. Liazuk Ref. 516 Other Accounts Dr. 180 729 306 1,000 800 7-64 COMPREHENSIVE PROBLEM (Continued) (a) & (e) General Journal Date Jan. Account Titles and Explanations Sales Returns and Allowances .................................. Accounts Receivable-- J. Ebel................................... (Issued credit for merchandise returned) Accounts Payable--S. Liazuk........ Purchase Returns and Allowances .......................... (Received credit for returned goods) Accounts Payable-- R. Mikush ..................................... Notes Payable ......................... (Payment of balance due) Office Supplies Expense................ Office Supplies........................ Insurance Expense ......................... (1/10 X 2,000) Prepaid Insurance................... Depreciation Expense .................... (1/12 X 1,500) Accumulated Depreciation-- Equipment Interest Expense ............................. Interest Payable ...................... Ref. 412 112/ Debit 300 300 G1 Credit 9 18 201/ 512 200 200 21 201/ 200 728 125 722/ 130/ 711 158 718 230 15,000 15,000 900 900 200 200 125 125 30 30 31 31 31 31 7-65 COMPREHENSIVE PROBLEM (Continued) General Journal Date Jan. 31 Account Titles and Explanations Merchandise Inventory (Jan. 31) .... Sales .................................................. Purchase Returns and Allowances.................................... Income Summary...................... Income Summary ............................. Merchandise Inventory (Jan. 1) ................................... Sales Returns and Allowances............................ Purchases ................................. Freight In ................................... Rent Expense............................ Sales Salaries Expense ........... Office Salaries Expense........... Office Supplies Expense ......... Insurance Expense................... Depreciation Expense .............. Interest Expense....................... Income Summary ............................. I. Raymond, Capital .................. I. Raymond, Capital .......................... I. Raymond, Drawing ................ Ref. 120 401 512 350 350 120 412 510 516 729 627 727 728 722 711 718 350 301 301 306 4,685 4,685 800 800 Debit 16,000 72,720 200 88,920 84,235 20,000 300 54,600 180 1,000 4,300 2,600 900 200 125 30 G1 Credit 31 31 31 (b) & (e) Cash Date Jan. 1 31 31 Explanation Balance General Ledger No. 101 Ref. CR1 CP1 Debit 64,420 58,180 Credit Balance 33,750 98,170 39,990 7-66 COMPREHENSIVE PROBLEM (Continued) Accounts Receivable Date Jan. 1 31 31 9 Explanation Balance Ref. S1 CR1 G1 Debit 19,800 11,500 300 Credit No. 112 Balance 13,000 32,800 21,300 21,000 No. 115 Balance 39,000 No. 120 Balance 20,000 36,000 16,000 No. 125 Balance 1,000 1,600 700 No. 130 Balance 2,000 1,800 No. 157 Balance 6,450 Notes Receivable Date Explanation Jan. 1 Balance Merchandise Inventory Date Explanation Jan. 1 Balance 31 31 Office Supplies Date Explanation Jan. 1 Balance 31 31 Prepaid Insurance Date Explanation Jan. 1 Balance 31 Equipment Date Explanation Jan. 1 Ref. Debit Credit Ref. G1 G1 Debit 16,000 Credit 20,000 Ref. CP1 G1 Debit 600 Credit 900 Ref. G1 Debit Credit 200 Ref. Debit Credit 7-67 COMPREHENSIVE PROBLEM (Continued) Accumulated Depreciation--Equipment Date Jan. Explanation 1 31 Ref. G1 Debit Credit 125 No. 158 Balance 1,500 1,625 No. 200 Balance 15,000 No. 201 Ref. P1 CP1 G1 G1 Debit Credit 54,600 48,700 200 15,000 Balance 35,000 89,600 40,900 40,700 25,700 No. 230 Balance 30 No. 301 Ref. G1 G1 Debit Credit 4,685 800 Balance 78,700 83,385 82,585 No. 306 Ref. CP1 G1 Debit 800 Credit 800 Balance 800 0 Notes Payable Date Explanation Jan. 21 Accounts Payable Date Jan. Explanation 1 31 31 18 21 Ref. G1 Debit Credit 15,000 Interest Payable Date Explanation Jan. 31 I. Raymond, Capital Date Jan. Explanation 1 31 31 Ref. G1 Debit Credit 30 I. Raymond, Drawing Date Jan. 15 31 Explanation Balance 7-68 COMPREHENSIVE PROBLEM (Continued) Income Summary Date Jan. 31 31 31 Sales Date Jan. 31 31 31 Explanation Ref. S1 CR1 G1 Debit Credit 19,800 52,920 Explanation Ref. G1 G1 G1 Debit 84,235 4,685 Credit 88,920 No. 350 Balance 88,920 4,685 0 No. 401 Balance 19,800 72,720 0 No. 412 Ref. G1 G1 Debit 300 Credit 300 Balance 300 0 No. 510 Balance 54,600 0 No. 512 Balance 200 0 No. 516 Explanation 8 31 Ref. CP1 G1 Debit 180 Credit 180 Balance 180 0 72,720 Sales Returns and Allowances Date Jan. Explanation 9 31 Purchases Date Explanation Jan. 31 31 Ref. P1 G1 Debit 54,600 Credit 54,600 Purchase Returns and Allowances Date Explanation Ref. Jan. 18 G1 31 G1 Freight In Date Jan. Debit 200 Credit 200 7-69 COMPREHENSIVE PROBLEM (Continued) Sales Salaries Expense Date Jan. 31 31 Explanation Ref. CP1 G1 Debit 4,300 Credit 4,300 No. 627 Balance 4,300 0 Depreciation Expense Date Explanation Jan. 31 31 Ref. G1 G1 Debit 125 Credit 125 No. 711 Balance 125 0 Interest Expense Date Explanation Jan. 31 31 Ref. G1 G1 Debit 30 Credit 30 No. 718 Balance 30 0 Insurance Expense Date Explanation Jan. 31 31 Ref. G1 G1 Debit 200 Credit 200 No. 722 Balance 200 0 Office Salaries Expense Date Explanation Jan. 31 31 Ref. CP1 G1 Debit 2,600 Credit 2,600 No. 727 Balance 2,600 0 Office Supplies Expense Date Explanation Jan. 31 31 Ref. G1 G1 Debit 900 Credit 900 No. 728 Balance 900 0 7-70 COMPREHENSIVE PROBLEM (Continued) Rent Expense Date Jan. 12 31 Explanation Ref. CP1 G1 Debit 1,000 Credit 1,000 No. 729 Balance 1,000 0 Accounts Receivable Subsidiary Ledger R. Draves Date Explanation Jan. 1 Balance 11 22 J. Ebel Date Jan. 3 9 13 25 Ref. S1 S1 Debit 1,900 800 Credit Balance 1,500 3,400 4,200 Explanation Ref. S1 G1 CR1 S1 Debit 1,800 6,100 Credit 300 1,500 Balance 1,800 1,500 0 6,100 B. Jacovetti Date Explanation Jan. 1 7 25 S. Kysely Date Explanation Jan. 1 7 11 21 Ref. CR1 S1 Debit Credit 2,000 3,500 Balance 7,500 5,500 9,000 Ref. CR1 S1 CR1 Debit Credit 4,000 900 900 Balance 4,000 0 900 0 7-71 COMPREHENSIVE PROBLEM (Continued) B. Soto Date Jan. Explanation 3 13 22 Ref. S1 CR1 S1 Debit 3,100 1,700 Credit 3,100 Balance 3,100 0 1,700 Accounts Payable Subsidiary Ledger D. Laux Date Jan. Explanation 5 27 Ref. P1 P1 Debit Credit 2,700 1,200 Balance 2,700 3,900 S. Liazuk Date Explanation Jan. 1 Balance 9 16 18 23 R. Mikush Date Explanation Jan. 1 Balance 21 D. Nguyen Date Explanation Jan. 1 Balance 9 16 23 27 Ref. CP1 P1 G1 CP1 Debit 9,000 Credit 13,900 200 13,700 Balance 9,000 0 13,900 13,700 0 Ref. G1 Debit 15,000 Credit Balance 15,000 0 Ref. CP1 P1 CP1 P1 Debit 11,000 Credit 15,000 15,000 14,500 Balance 11,000 0 15,000 0 14,500 7-72 COMPREHENSIVE PROBLEM (Continued) S. Welz Date Jan. Explanation 5 16 27 Ref. P1 P1 P1 Debit Credit 3,000 1,500 2,800 Balance 3,000 4,500 7,300 7-73 (c) RAYMOND COMPANY Work Sheet For the Month Ended January 31, 2005 Trial Balance Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Adjustments Adjusted Trial Balance Income Statement Balance Sheet Cr. Account Titles 20,000 16,000 39,990 21,000 39,000 20,000 1,600 2,000 6,450 (1) (2) 1,500 15,000 25,700 (4) 78,700 800 800 72,720 300 54,600 300 54,600 200 180 4,300 2,600 1,000 193,820 000,000 193,820 (1) (2) (3) (4) 900 200 125 30 1,255 180 4,300 2,600 1,000 200 180 4,300 2,600 1,000 72,720 300 54,600 200 72,720 30 (3) 1,625 15,000 25,700 30 78,700 125 900 200 39,990 21,000 39,000 20,000 700 1,800 6,450 39,990 21,000 39,000 16,000 700 1,800 6,450 COMPREHENSIVE PROBLEM (Continued) 7-74 0,000 1,255 900 200 125 30 193,975 ,000 193,975 1,625 15,000 25,700 30 78,700 800 Cash Accounts Receivable Notes Receivable Merchandise Inventory Office Supplies Prepaid Insurance Equipment Accum. Depreciation--Equipment Notes Payable Accounts Payable Interest Payable I. Raymond, Capital I. Raymond, Drawing Sales Sales Returns and Allowances Purchases Purchase Returns and Allowances Freight In Sales Salaries Expense Office Salaries Expense Rent Expense Totals Office Supplies Expense Insurance Expense Depreciation Expense Interest Expense Totals Net Income Totals 900 200 125 30 84,235 4,685 88,920 00,000 88,920 00,000 88,920 000,000 125,740 125,740 000,000 121,055 4,685 125,740 COMPREHENSIVE PROBLEM (Continued) (d) RAYMOND CO. Income Statement For the Month Ended January 31, 2005 Sales revenues Sales................................................. Less: Sales returns and allowances ....................... Net sales revenue ........................... Cost of goods sold Merchandise inventory, 1/1/05 ...... Purchases........................................ Less: Purchase returns and allowances ....................... Net purchases ................................. Freight in.......................................... Total merchandise available for sale ............................................... Less: Merchandise inventory, 1/31/05........................................ Cost of goods sold ................... Gross profit on sales...................... Operating expenses Selling expenses Sales salaries expense ............ Administrative expenses Office salaries expense ........... Rent expense ............................ Office supplies expense .......... Insurance expense ................... Depreciation expense .............. Total admin. expenses....... Total oper. expenses ......... Income from operations ....................... Other expenses and losses Interest expense ............................. Net income............................................. $72,720 300 72,420 $20,000 $54,600 200 54,400 180 54,580 74,580 16,000 58,580 13,840 $ 4,300 $ 2,600 1,000 900 200 125 4,825 9,125 4,715 30 $ 4,685 7-75 COMPREHENSIVE PROBLEM (Continued) RAYMOND CO. Statement of Owner's Equity For the Month Ended January 31, 2005 I. Raymond, Capital, January 1, 2005 ...................................... Add: Net income ...................................................................... Less: Drawing ........................................................................... I. Raymond, Capital, January 31, 2005 .................................... RAYMOND CO. Balance Sheet January 31, 2005 Assets Current assets Cash .............................................................. Notes receivable .......................................... Accounts receivable .................................... Merchandise inventory................................ Office supplies ............................................. Prepaid insurance........................................ Total current assets ............................. Capital assets Equipment .................................................... Less: Accumulated depreciation .............. Total assets .......................................... Liabilities and Owner's Equity Current liabilities Notes payable............................................... Accounts payable ........................................ Interest payable............................................ Total liabilities ...................................... Owner's equity I. Raymond, Capital...................................... Total liabilities and owner's equity................................................. 7-76 $78,700 4,685 83,385 800 $82,585 $39,990 39,000 21,000 16,000 700 1,800 $118,490 $ 6,450 1,625 4,825 $123,315 $15,000 25,700 30 $ 40,730 82,585 $123,315 COMPREHENSIVE PROBLEM (Continued) (f) RAYMOND CO. Post-Closing Trial Balance January 31, 2005 Cash................................................................... Notes Receivable ............................................. Accounts Receivable ....................................... Merchandise Inventory .................................... Office Supplies ................................................. Prepaid Insurance ............................................ Equipment......................................................... Accumulated Depreciation--Equipment ....... Notes Payable................................................... Accounts Payable ............................................ Interest Payable................................................ I. Raymond, Capital.......................................... Debit $ 39,990 39,000 21,000 16,000 700 1,800 6,450 $ Credit 0000,000 $124,940 1,625 15,000 25,700 30 82,585 $124,940 Accounts Receivable balance ............................... Subsidiary account balances R. Draves.......................................................... J. Ebel............................................................... B. Jacovetti ...................................................... B. Soto.............................................................. Accounts Payable balance..................................... Subsidiary account balances D. Laux ............................................................. D. Nguyen......................................................... S. Welz.............................................................. $ 3,900 14,500 7,300 $ 4,200 6,100 9,000 1,700 $21,000 $21,000 $25,700 $25,700 7-77 BYP 7-1 FINANCIAL REPORTING PROBLEM--A MINI PRACTICE SET (a) Sales Journal S1 Date Jan. 3 3 11 11 22 22 25 25 Account Debited B. Stahre J. Eppler R. Dvorak S. LaDew B. Stahre R. Dvorak B. Garcia J. Eppler Invoice Accounts Receivable Dr. Cost of Goods Sold Dr. No. Ref. Sales Cr. Merchandise Inventory Cr. 510 511 512 513 514 515 516 517 4,100 1,800 1,600 900 2,700 800 3,500 6,100 21,500 (112)(401) 2,460 1,080 960 540 1,620 480 2,100 3,660 12,900 (505)(120) Purchases Journal P1 Merchandise Inventory Dr. Accounts Payable Cr. 3,000 2,200 16,000 14,200 1,500 14,500 1,200 5,400 58,000 (120)(201) Date Jan. 5 5 16 16 16 27 27 27 Account Credited S. Wong D. Lynch D. Norby S. Jung S. Wong D. Norby D. Lynch S. Wong Terms n/30 n/30 1/10, n/30 2/10, n/30 n/30 1/10, n/30 n/30 n/30 Ref. 7-78 BYP 7-1 (Continued) Cash Receipts Journal CR1 Account Credited S. LaDew B. Garcia B. Stahre J. Eppler S. LaDew Cash Dr. 4,000 2,000 15,500 4,018 1,470 18,100 882 21,300 67,270 (101) Sales Accounts Discounts Receivable Dr. Cr. 4,000 2,000 15,500 82 30 18 000 130 (414) 4,100 1,500 18,100 900 00,000 12,500 (112) 21,300 54,900 (401) 10,860 12,780 32,940 (505)(120) 9,300 Sales Cr. Cost of Goods Sold Other Dr. Accounts Merchandise Inventory Cr. Cr. Date Jan. 7 7 10 13 13 20 21 31 Ref. Cash Payments Journal CP1 Date Jan. 8 9 9 12 15 17 23 23 28 31 31 Account Debited Merchandise Inventory S. Jung D. Norby Rent Expense M. Cedzo, Drawing D. Norby S. Jung Sales Salaries Expense Office Salaries Expense 627 727 4,300 2,800 9,135 (X) Ref. 120 Other Accounts Dr. 235 9,000 11,000 729 306 1,000 800 400 16,000 14,000 200 00,000 50,000 (201) 000 600 (125) 000 730 (120) 160 280 180 110 Accounts Payable Dr. Office Supplies Dr. Merchandise Inventory Cr. Cash Cr. 235 8,820 10,890 1,000 800 400 15,840 13,720 200 4,300 2,800 59,005 (101) 7-79 BYP 7-1 (Continued) (a) & (e) General Journal Date Jan. Account Titles and Explanations Sales Returns and Allowances ....... Accounts Receivable-- J. Eppler................................. (Issued credit for merchandise returned) Merchandise Inventory .................... ($300 X .60) Cost of Goods Sold .................. 18 Accounts Payable--S. Jung ............ Merchandise Inventory............. (Received credit for returned goods) Accounts Payable--R. Moses ......... Notes Payable ........................... (Payment of balance due) Office Supplies Expense.................. Office Supplies.......................... Insurance Expense........................... Prepaid Insurance..................... Depreciation Expense ($1,500 12) ..................................... Accumulated Depreciation-- Equipment Interest Expense............................... Interest Payable ........................ Sales .................................................. Income Summary...................... 7-80 9 Ref. 412 112/ Debit 300 G1 Credit 300 120 505 201/ 120/ 180 180 200 200 21 201/ 200/ 15,000 15,000 31 31 31 728 125 722 130 711 158 718 230 401 350 700 700 200 200 125 125 50 50 76,400 76,400 31 31 BYP 7-1 (Continued) General Journal Date Jan. 31 Account Titles and Explanations Income Summary............................. Sales Discounts ....................... Sales Returns and Allowances ........................... Cost of Goods Sold ................. Rent Expense ........................... Sales Salaries Expense........... Office Salaries Expense .......... Office Supplies Expense......... Insurance Expense .................. Depreciation Expense ............. Interest Expense ...................... Income Summary............................. M. Cedzo, Capital ..................... M. Cedzo, Capital............................. M. Cedzo, Drawing................... Ref. 350 414 412 505 729 627 727 728 722 711 718 350 301 301 306 21,135 21,135 800 800 Debit 55,265 G1 Credit 130 300 45,660 1,000 4,300 2,800 700 200 125 50 31 31 (b) & (e) Cash Date Jan. 1 31 31 General Ledger No. 101 Balance 35,750 103,020 44,015 No. 112 Balance 13,000 34,500 22,000 21,700 Explanation Balance Ref. CR1 CP1 Debit 67,270 Credit 59,005 Accounts Receivable Date Explanation Jan. 1 Balance 31 31 9 Ref. S1 CR1 G1 7-81 Debit 21,500 Credit 12,500 300 BYP 7-1 (Continued) Notes Receivable Date Jan. 1 Explanation Balance Ref. Debit Credit No. 115 Balance 39,000 Merchandise Inventory Date Jan. 1 31 31 31 8 31 9 18 Explanation Balance Ref. P1 S1 CR1 CP1 CP1 G1 G1 Debit 58,000 12,900 32,940 235 730 180 200 Credit No. 120 Balance 18,000 76,000 63,100 30,160 30,395 29,665 29,845 29,645 Office Supplies Date Jan. 1 31 31 Explanation Balance Ref. CP1 G1 Debit 600 700 Credit No. 125 Balance 1,000 1,600 900 Prepaid Insurance Date Explanation Jan. 1 Balance 31 Ref. G1 Debit Credit 200 No. 130 Balance 2,000 1,800 Equipment Date Explanation Jan. 1 Balance Ref. Debit Credit No. 157 Balance 6,450 7-82 BYP 7-1 (Continued) Accumulated Depreciation--Equipment Date Jan. 1 31 Explanation Balance Ref. G1 Debit Credit 125 No. 158 Balance 1,500 1,625 No. 200 Balance 15,000 No. 201 Ref. P1 CP1 G1 G1 Debit Credit 58,000 50,000 200 15,000 Balance 35,000 93,000 43,000 42,800 27,800 No. 230 Balance 50 No. 301 Ref. G1 G1 Debit Credit 21,135 800 Balance 78,700 99,835 99,035 No. 306 Ref. CP1 G1 Debit 800 Credit 800 Balance 800 0 Notes Payable Date Explanation Jan. 21 Accounts Payable Date Jan. 1 31 31 18 21 Explanation Balance Ref. G1 Debit Credit 15,000 Interest Payable Date Explanation Jan. 31 M. Cedzo, Capital Date Jan. 1 31 31 Explanation Balance Ref. G1 Debit Credit 50 M. Cedzo, Drawing Date Jan. 15 31 Explanation 7-83 BYP 7-1 (Continued) Income Summary Date Jan. 31 31 31 Explanation Ref. G1 G1 G1 Debit 55,265 21,135 Credit 76,400 No. 350 Balance 76,400 21,135 0 Sales Date Jan. 31 31 31 Explanation Ref. S1 CR1 G1 Debit Credit 21,500 54,900 76,400 No. 401 Balance 21,500 76,400 0 Sales Returns and Allowances Date Jan. Explanation 9 31 Ref. G1 G1 Debit 300 Credit 300 No. 412 Balance 300 0 Sales Discounts Date Explanation Jan. 31 31 Ref. CR1 G1 Debit 130 Credit 130 No. 414 Balance 130 0 Cost of Goods Sold Date Explanation Jan. 31 31 9 31 Ref. S1 CR1 G1 G1 Debit 12,900 32,940 Credit 180 45,660 No. 505 Balance 12,900 45,840 45,660 0 7-84 BYP 7-1 (Continued) Sales Salaries Expense Date Jan. 31 31 Explanation Ref. CP1 G1 Debit 4,300 Credit 4,300 No. 627 Balance 4,300 0 No. 711 Balance 125 0 No. 718 Balance 50 0 No. 722 Ref. G1 G1 Debit 200 Credit 200 Balance 200 0 No. 727 Balance 2,800 0 No. 728 Balance 700 0 Depreciation Expense Date Explanation Jan. 31 31 Interest Expense Date Explanation Jan. 31 31 Insurance Expense Date Jan. 31 31 Explanation Ref. G1 G1 Debit 125 Credit 125 Ref. G1 G1 Debit 50 Credit 50 Office Salaries Expense Date Explanation Jan. 31 31 Office Supplies Expense Date Explanation Jan. 31 31 Ref. CP1 G1 Debit 2,800 Credit 2,800 Ref. G1 G1 Debit 700 Credit 700 7-85 BYP 7-1 (Continued) Rent Expense Date Jan. 12 31 Explanation Ref. CP1 G1 Debit 1,000 Credit 1,000 No. 729 Balance 1,000 0 Accounts Receivable Subsidiary Ledger R. Dvorak Date Explanation Jan. 1 Balance 11 22 J. Eppler Date Jan. 3 9 13 25 Ref. S1 S1 Debit 1,600 800 Credit Balance 1,500 3,100 3,900 Explanation Ref. S1 G1 CR1 S1 Debit 1,800 6,100 Credit 300 1,500 Balance 1,800 1,500 0 6,100 B. Garcia Date Explanation Jan. 1 Balance 7 25 S. LaDew Date Explanation Jan. 1 Balance 7 11 21 Ref. CR1 S1 Debit Credit 2,000 3,500 Balance 7,500 5,500 9,000 Ref. CR1 S1 CR1 Debit Credit 4,000 900 900 Balance 4,000 0 900 0 7-86 BYP 7-1 (Continued) B. Stahre Date Jan. Explanation 3 13 22 Ref. S1 CR1 S1 Debit 4,100 2,700 Credit 4,100 Balance 4,100 0 2,700 Accounts Payable Subsidiary Ledger D. Lynch Date Jan. Explanation 5 27 Ref. P1 P1 Debit Credit 2,200 1,200 Balance 2,200 3,400 S. Jung Date Jan. 1 9 16 18 23 Explanation Balance Ref. CP1 P1 G1 CP1 Debit 9,000 Credit 14,200 200 14,000 Balance 9,000 0 14,200 14,000 0 R. Moses Date Explanation Jan. 1 Balance 21 D. Norby Date Jan. 1 9 16 23 27 Ref. G1 Debit 15,000 Credit Balance 15,000 0 Explanation Balance Ref. CP1 P1 CP1 P1 Debit 11,000 Credit 16,000 16,000 14,500 Balance 11,000 0 16,000 0 14,500 7-87 BYP 7-1 (Continued) S. Wong Date Jan. Explanation 5 16 27 Ref. P1 P1 P1 Debit Credit 3,000 1,500 5,400 Balance 3,000 4,500 9,900 7-88 (c) CEDZO COMPANY Work Sheet For the Month Ended January 31, 2005 Trial Balance Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Adjustments Adjusted Trial Balance Income Statement Balance Sheet Dr. Cr. BYP 7-1 (Continued) Account Titles 44,015 21,700 39,000 29,645 1,600 2,000 6,450 (1) (2) 1,500 15,000 27,800 (4) 78,700 800 76,400 300 130 45,660 4,300 2,800 1,000 199,400 000,000 199,400 (1) (2) (3) (4) 700 200 125 50 1,075 300 130 45,660 4,300 2,800 1,000 800 76,400 300 130 45,660 4,300 2,800 1,000 50 (3) 125 1,625 15,000 27,800 50 78,700 700 200 44,015 21,700 39,000 29,645 900 1,800 6,450 44,015 21,700 39,000 29,645 900 1,800 6,450 1,625 15,000 27,800 50 78,700 800 76,400 7-89 0,000 1,075 Cash Accounts Receivable Notes Receivable Merchandise Inventory Office Supplies Prepaid Insurance Equipment Accum. Depreciation--Equipment Notes Payable Accounts Payable Interest Payable M. Cedzo, Capital M. Cedzo, Drawing Sales Sales Returns and Allowances Sales Discounts Cost of Goods Sold Sales Salaries Expense Office Salaries Expense Rent Expense Totals Office Supplies Expense Insurance Expense Depreciation Expense Interest Expense Totals Net Income Totals 700 200 125 50 199,575 000,000 199,575 700 200 125 50 55,265 21,135 76,400 00,000 76,400 00,000 76,400 000,000 144,310 144,310 000,000 123,175 21,135 144,310 BYP 7-1 (Continued) (d) CEDZO CO. Income Statement For the Month Ended January 31, 2005 Sales revenues Sales................................................. Less: Sales discounts ................... Sales returns and allowances ....................... Net sales revenue ........................... Cost of goods sold ......................... Gross profit ..................................... Operating expenses Selling expenses Sales salaries expense ........... Administrative expenses Office salaries expense .......... Rent expense........................... Office supplies expense ......... Insurance expense.................. Depreciation expense ............. Total administrative expenses ...................... Total operating expenses .............. Income from operations......................... Other expenses and losses Interest expense.............................. Net income .............................................. $76,400 $ 130 300 430 75,970 45,660 30,310 4,300 $2,800 1,000 700 200 125 4,825 9,125 21,185 50 $21,135 7-90 BYP 7-1 (Continued) CEDZO CO. Owner's Equity Statement For the Month Ended January 31, 2005 M. Cedzo, Capital, January 1, 2005 ......................................... Add: Net income ..................................................................... Less: Drawings ........................................................................ M. Cedzo, Capital, January 31, 2005 ....................................... CEDZO CO. Balance Sheet January 31, 2005 Assets Current assets Cash.............................................................. Notes receivable.......................................... Accounts receivable ................................... Merchandise inventory ............................... Office supplies ............................................ Prepaid insurance ....................................... Total current assets ............................ Property, plant, and equipment Equipment.................................................... Less: Accumulated depreciation.............. Total assets.......................................... Liabilities and Owner's Equity Current liabilities Notes payable.............................................. Accounts payable ....................................... Interest payable........................................... Total liabilities ..................................... Owner's equity M. Cedzo, Capital ........................................ Total liabilities and owner's equity ................................................ 7-91 $78,700 21,135 99,835 800 $99,035 $44,015 39,000 21,700 29,645 900 1,800 $137,060 6,450 1,625 4,825 $141,885 $15,000 27,800 50 $ 42,850 99,035 $141,885 BYP 7-1 (Continued) (f) CEDZO CO. Post-Closing Trial Balance January 31, 2005 Cash .................................................................. Notes Receivable ............................................. Accounts Receivable....................................... Merchandise Inventory.................................... Office Supplies................................................. Prepaid Insurance............................................ Equipment ........................................................ Accumulated Depreciation--Equipment ....... Notes Payable .................................................. Accounts Payable ............................................ Interest Payable ............................................... M. Cedzo, Capital ............................................. Debit $ 44,015 39,000 21,700 29,645 900 1,800 6,450 $ Credit $143,510 1,625 15,000 27,800 50 99,035 $143,510 Accounts Receivable balance ............................... Subsidiary account balances R. Dvorak ......................................................... J. Eppler ........................................................... B. Garcia .......................................................... B. Stahre .......................................................... Accounts Payable balance .................................... Subsidiary account balances D. Lynch ........................................................... D. Norby ........................................................... S. Wong............................................................ $ 3,400 14,500 9,900 $ 3,900 6,100 9,000 2,700 $21,700 $21,700 $27,800 $27,800 7-92 BYP 7-2 EXPLORING THE WEB (a) Some of the key features of the general ledger module highlighted by the company are: Highly flexible account and fiscal period setup, including different account structures for separate companies. Account numbers can be up to 20 characters long in 10 segments. Statistical accounts for tracking nonfinancial information, such as head count and square footage. Standa rd, recurring, auto-reve rsing, clear ing, and "quick- jour nal" e ntr i e s . Unlimited budgets, unlimited years of history. (b) Some of the ke y fe atur es of the pa yabl es management modul e hi ghli ghted by the com pany are: Handles purchases on account, manual and computer check payments, and credit memos. Vendor classes provide a fast, consistent method for entering new records by entering common information for you. Changes to one vendor in a class can be made to all vendors in the same class. Automatically calculates the number of days it takes to pay each vendor. Enter recurring transactions. Put transactions on "hold" until you want to pay them. A vari ety of inqui ry windows and repor ts provi de multi ple ways to vi ew vendor inform ation. Complete vendor and transaction history. 7-93 BYP 7-3 GROUP DECISION CASE (a) The specia l journa ls for Manion & Roben should be: (1) sal es journal, (2) purcha ses jour nal, (3) cash receipts journal, and (4) cash payments j o ur na l . (1) Sales Journal columns: Date. Account Debited. Invoice Number. Reference. Accounts Receivable, Dr. and Sales--Appliances, Cr. Cost of Goods Sold, Dr. and Merchandise Inventory, Cr. (2) Purchases Journal columns: Date. Account Credited. Terms. Reference. Accounts Payable, Cr. Merchandise Inventory--Appliances, Dr. Merchandise Inventory--Parts, Dr. Note: Because two different types of merchandise are purchased on credit, a three-col umn purchase s journa l mi ght be used. (3) Cash Receipts Journal columns: Date. Account Credited. Reference. Cash, Dr. Accounts Receivable, Cr. Sales--Appliances, Cr. Sales--Parts, Cr. Revenue from Repairs, Cr. Other Accounts, Cr. Cost of Goods Sold, Dr. and Merchandise Inventory, Cr. Note: A Sales Dis counts, Dr. column is not ne eded bec ause all cr edit ter ms are net/3 0 da ys. 7-94 BYP 7-3 (Continued) (4) Cash Payments Journal columns: Date. Check Number. Account Debited. Reference. Other Accounts, Dr. Accounts Payable, Dr. Advertising Expense, Dr. Salaries Expense, Dr. Cash, Cr. (b) Manion & Roben should have: (1) An accounts receivable control account with individual customers' accounts in a customers' subsidiary ledger. (2) An accounts payable control account with individual creditors in a creditors' subsidiary ledger. The us e of control accounts and subsidiary ledgers wil l: (1) provi de ne ces sary up-to-date informat ion on speci fic customer and creditor balances, (2) free the general ledger of excessive detail, (3) help locate errors in individual accounts, and (4) make poss ible a divis ion of labor in posting. 7-95 BYP 7-4 COMMUNICATION ACTIVITY Mr. Jon Breiwa 2 Main Street Central City, Michigan 48172 Dear Mr. Breiwa: Thank you for hiring two additional bookkeepers a month ago to help me with the accounting. Unfortunately, the inefficiencies in recording transactions have continued at an even higher rate. The reason is that there are often times when more than one person needs to use the journal. In addition, the daily posting of transactions continues to be very time consuming. I would like to suggest some changes in the accounting system. Because of the increased volume of business, I believe it is time for us to use special journals for journalizing transactions. Special journals would be in addition to the journal that we are using now. There would be four special journals: 1. 2. 3. 4. Sales journal--for all sales of merchandise on account. Cash receipts journal--for all cash received. Purchases journal--for all purchases of merchandise on account. Cash payments journal--for all cash payments. To use special journals, we will need columnar journal paper which can be obtained at any office supply store at very low cost. I can also quickly train the new bookkeepers in the use of special journals. Special journals will permit a division of labor so that all three of us can be recording transactions at the same time. Thus, the inefficiencies in journalizing will be eliminated. Special journals also make it possible to do some postings monthly. This will significantly reduce the time required to make daily postings. As a result, it should free up some time for us to do other things! I am confident that the use of special journals will improve the efficiency of the accounting department. If you have any questions on this recommendation, please let me know. Yours sincerely, Kris 7-96 BYP 7-5 ETHICS CASE (a) The stakeholders in this case are: Ismael Soto, manager of Teofilo's centralized computer accounting operation. The employees of Teofilo's three divisions at Freeport, Rockport, and Bayport. (b) Ismael's instructions to assign the Bayport code to all uncoded and incorrectly coded sales documents overstates the sales of Bayport and understates the sales of Freeport and Rockport, thereby affecting the employee bonus plan. Ismael's intent and action are unethical. He is padding the sales of his wife's, relatives', and friends' Bayport division sales and unfairly aiding them in the bonus competition. (c) Teofilo Products Company should have a written policy covering uncoded and incorrectly coded sales documents. This would prevent the manager from arbitrarily designating the division to be credited for the uncoded sales. 7-97 ...
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This note was uploaded on 04/18/2008 for the course ACT 230 taught by Professor Thompson during the Spring '08 term at N. Michigan.

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