E 6-7

E 6-7

Nov. 6 Sale on account to Jo Mei Chang.

14 Vitria Paint credited Chang’s account. Either Chang returned merchandise to Vitria, or Vitria granted a sales allowance to Chang.

27 Cash receipt from Chang.

(10-15 min.) E 6-8

Journal
DATE		ACCOUNTS AND EXPLANATIONS	POST. REF.	DEBIT	CREDIT
April	5	Supplies		1,106
		Accounts Payable – Disch Corp.			1,106
		Purchased supplies on account.

	11	Inventory		3,600
		Accounts Payable – Conn Corp.			3,600
		Purchased inventory on account.

	19	Equipment		14,300
		Accounts Payable – Saturn Co.			14,300
		Purchased equipment on account.

	22	Inventory		2,210
		Accounts Payable – Milan, Inc.			2,210
		Purchased inventory on account.

(continued) E 6-8

Purchases Journal
DATE		ACCOUNT CREDITED	TERMS	POST. REF.	CREDITS	DEBITS
					ACCOUNTS PAYABLE	INVENTORY	SUPPLIES	OTHER ACCOUNTS
					ACCOUNTS PAYABLE	INVENTORY	SUPPLIES	ACCOUNT TITLE	POST. REF.	AMOUNT
April	5	Disch Corp.			1,106		1,106
	11	Conn Corp.			3,600	3,600
	19	Saturn Co.			14,300			Equipment		14,300
	22	Milan, Inc.			2,210	2,210	_______			______
	30	Totals			21,216	5,810	1,106			14,300

Recording the transactions in the purchases journal is quicker because it takes less writing.

(15 min.) E 6-9

Req. 1 (posting to the general ledger)

ACCOUNT INVENTORY
			JRNL.			BALANCE
DATE		ITEM	REF.	DEBIT	CREDIT	DEBIT	CREDIT
Sept.	30		P.7	1,951		1,951

ACCOUNT SUPPLIES
			JRNL.			BALANCE
DATE		ITEM	REF.	DEBIT	CREDIT	DEBIT	CREDIT
Sept.	30		P.7	175		175

ACCOUNT EQUIPMENT
			JRNL.			BALANCE
DATE		ITEM	REF.	DEBIT	CREDIT	DEBIT	CREDIT
Sept.	26		P.7	916		916

ACCOUNT ACCOUNTS PAYABLE
			JRNL.			BALANCE
DATE		ITEM	REF.	DEBIT	CREDIT	DEBIT	CREDIT
Sept.	30		P.7		3,042		3,042

(continued) E 6-9

Req. 2 (posting to the accounts payable subsidiary ledger)

ACCOUNT FAVER EQUIPMENT COMPANY
			JRNL.			BALANCE
DATE		ITEM	REF.	DEBIT	CREDIT	DEBIT	CREDIT
Sept.	26		P.7		916		916

ACCOUNT LANCER TECHNOLOGIES
			JRNL.			BALANCE
DATE		ITEM	REF.	DEBIT	CREDIT	DEBIT	CREDIT
Sept.	2		P.7		800		800
	13		P.7		1,151		1,951

ACCOUNT SATURN OFFICE SUPPLY
			JRNL.			BALANCE
DATE		ITEM	REF.	DEBIT	CREDIT	DEBIT	CREDIT
Sept.	5		P.7		175		175

Req. 3 (balancing the ledgers)

Credit balance from Accounts Payable control account

in general ledger $3,042

Total of balances in accounts payable subsidiary ledger

($916 + $1,951 + $175) $3,042

(10 min.) E 6-10

Reqs. 1, 2, and 3

Cash Payments Journal
DATE		ACCOUNT DEBITED	DEBITS		CREDITS
DATE		ACCOUNT DEBITED	OTHER ACCOUNTS	ACCOUNTS PAYABLE	INVENTORY	CASH
Aug.	1	Rabin Associates		500	10	490
	5	Inventory	4,300			4,300
	9	Supplies	375			375
	16	LaGrange Company		4,062		4,062
	21	Furniture	960			960
	26	VisioNet Software		4,000	90	3,910
	30	Interest Expense	800	___________	___________	800
	31	Totals	6,435	8,562	100	14,897

14,997 14,997

The August 15 purchase of inventory on credit should not be recorded in the cash payments journal. It belongs in the purchases journal.

(10-15 min.) E 6-11

BIWHEEL JOURNAL ENTRIES SCHWINN JOURNAL ENTRIES

Journal
DATE		ACCOUNT TITLE	DEBIT	CREDIT	ACCOUNT TITLE	DEBIT	CREDIT
May	14	Inventory	1,130		Accounts Receivable – BiWheel	1,130
		Accounts Payable – Schwinn		1,130	Sales Revenue		1,130

					Cost of Goods Sold	690
					Inventory		690

	20	Accounts Payable – Schwinn	165		Sales Returns and Allowances	165
		Inventory		165	Accounts Receivable – BiWheel		165

					Inventory	80
					Cost of Goods Sold		80

	21	Accounts Payable – Schwinn			Cash	946
		($1,130 ! $165)	965		Sales Discounts	19
		Inventory ($965 ´ .02)		19	Accounts Receivable – BiWheel		965
		Cash ($965 ! $19)		946

Challenge Exercise

(15-20 min.) E 6-12

1. Net sales revenue

Sales revenue ($4,319 + $3,172) $7,491

Less: Sales discounts (35) $7,456

Cost of goods sold ($1,814 + $1,707) 3,521

Gross profit $3,935

2. Cost of goods sold:

Beginning inventory (assumed $0) $ 0

Net purchases ($1,706 + $2,200 ! $21) 3,885

Cost of goods available for sale 3,885

Less: Ending inventory ($3,885 ! $3,521) (364)

Cost of goods sold $3,521

Yes, the two cost-of-goods-sold computations agree.

Faculty Webserver - Disclaimer

Views expressed on this website are the views of the faculty member.