AB-26PGA

Question

Tulsa Computer Security uses the perpetual inventory system and

makes all credit sales on terms of n/30. Tulsa completed the

following transactions during May:

May 2 Issued invoice no. 913 for sale on account to K. D. King, \(2,200 (cost,

\)1,500).

3 Purchased merchandise inventory on credit terms of 3/10, n/60 from

Henderson Co., \(2,900.

5 Sold merchandise inventory for cash, \)1,800 (cost, \(350).

5 Issued check no. 532 to purchase furniture for cash, \)2,950.

8 Collected interest revenue of \(1,350.

9 Issued invoice no. 914 for sale on account to Berkner Co., \)5,700 (cost,

\(2,000).

10 Purchased merchandise inventory for cash, \)1,000, issuing check no.

533.

12 Received cash from K. D. King in full settlement of her account

receivablefrom the sale on May 2.

13 Issued check no. 534 to pay Henderson Co. the net amount owed from

May 3. Round to the nearest dollar.

13 Purchased office supplies on account from Magyar, Inc., \(500. Terms

weren/EOM.

15 Sold merchandise inventory on account to M. O. Small, issuing invoice

no.915 for \)850 (cost, \(400).

18 Issued invoice no. 916 for credit sale to K. D. King, \)300 (cost, \(150).

19 Received cash from Berkner Co. in full settlement of its account

receivablefrom May 9.

20 Purchased merchandise inventory on credit terms of n/30 from Silva

Distributing, \)2,100.

22 Purchased furniture on credit terms of 3/10, n/60 from Henderson Co.,

\(500.

22 Issued check no. 535 to pay for insurance coverage, debiting Prepaid

Insurance for \)1,400.

24 Sold office supplies to an employee for cash of \(125, which was Tulsa’s

cost.

25 Received bill and issued check no. 536 to pay utilities, \)550.

28 Purchased merchandise inventory on credit terms of 2/10, n/30 from

Magyar, Inc., \(575.

29 Returned damaged merchandise inventory to Magyar, Inc., issuing a

debitmemo for \)575.

29 Sold merchandise inventory on account to Berkner Co., issuing invoice

no. 917 for $2,400 (cost, $1,400).

30 Issued check no. 537 to pay Magyar, Inc. in full for May 13 purchase.

31 Received cash in full from K. D. King on credit sale of May 18.

31 Issued check no. 538 to pay monthly salaries of \(2,250.

Requirements

1. Open four-column general ledger accounts using Tulsa’s account numbers

and balancesas of May 1, 2018, that follow. All accounts have normal

balances.

Number Account Bal.

111 Cash \) 15,000

112 Accounts Receivable 1,700

114 Merchandise Inventory 7,000

116 Office Supplies 600

117 Prepaid Insurance 0

151 Furniture 2,200

211 Accounts Payable 900

311 Common Stock 10,000

314 Retained Earnings 11,400

411 Sales Revenue 7,800

419 Interest Revenue 1,300

511 Cost of Goods Sold 2,800

531 Salaries Expense 1,900

541 Utilities Expense 200

2. Open four-column accounts in the subsidiary ledgers with beginning

balances asof May 1, if any. Accounts receivable subsidiary ledger—

Balakrishnan Co., $1,700;Berkner Co., $0; M. O. Small, \(0; and K. D. King,

\)0. Accounts payable subsidiaryledger—Henderson Co., \(0; Magyar, Inc.,

\)0; Silva Distributing, $0; and WhiteCo., $900.

3. Enter the transactions in a sales journal (page 7), a cash receipts journal

(page 5,omit Sales Discounts Forfeited column), a purchases journal (page

10), a cashpayments journal (page 8), and a general journal (page 6), as

appropriate.

4. Post daily to the accounts receivable subsidiary ledger and to the accounts

payablesubsidiary ledger.

5. Total each column of the special journals. Show that total debits equal total

creditsin each special journal. On May 31, post to the general ledger.

6. Prepare a trial balance as of May 31, 2018, to verify the equality of the

Generalledger. Balance the total of the customer account ending balances

in the accountsreceivable subsidiary ledger against Accounts Receivable in

the general ledger. Dothe same for the accounts payable subsidiary ledger

and Accounts Payable in thegeneral ledger.

Step-by-Step Solution

Verified

Answer

Four column account in general ledger shown in step 1, Four column subsidiary ledger account in step 2, entering transaction in ledger in step 3, posting to general ledger in step 4, posting to subsidiary ledger in step 5 and preparation of trial balance shown in step 6.

1Step1: Opening of general ledger accounts

Cash No. 111
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$15,000

Accounts Receivables No. 112
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$1,700

Merchandise Inventory No. 114
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$7,000

Office Supplies No. 116
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$600

Prepaid Insurance No. 117
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$0

Furniture No. 151
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$2,200

Accounts Payable No. 211
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$900

Common Stock No. 311
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$10,000

Retained Earnings No. 314
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$11,400

Sales Revenue No. 411
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$7,800

Interest Revenue No. 419
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$1,300

Cost of Goods Sold No. 511
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$2,800

Salaries Expenses No. 531
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$1,900

Utility Expenses No. 541
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$200

2Step 2: Opening of subsidiary ledger accounts Accounts receivables subsidiary ledger

Balakrishnan Co.
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$1,700

Berkner Co.
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$0

M. O. Small
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$0

K. D. King
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$0

Accounts payable subsidiary ledger

Henderson Co.
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$0

Magyar, Inc.
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$0

Silva Distributing
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$0

White Co.
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$900

3Step 3: Entering transactions in Special journal and general journal books

Sales Journal Page 7
Date	Invoice No.	Customer Account Debited	Post. Ref.	Accounts Receivables Dr Sales Revenue Cr	Cost of Goods Sold Dr. Merchandise Inventory Cr.
2018
May 2	913	K. D. King		$ 2,200	$ 1,500
9	914	Berkner Co.		5,700	2,000
15	915	M. O. Small		850	400
18	916	K. D. King		300	150
29	917	Berkner Co.		2,400	1,400
May 31		Total		$ 11,450	$ 5,450

Cash Receipt Journal Page 5
Date	Account Credited	Post. Ref.	Cash Dr	Accounts Receivables Cr	Sales Revenue Cr	Other Accounts Cr	Cost of goods sold Dr Merchandise Inventory Cr
2018
May 5			$1,800		$1,800		$350
8	Interest Revenue		1,350			$ 1,350
12	K. D. King		2,200	$ 2,200
19	Berkner Co.		5,700	5,700
24	Office Suplies		125			125
31	K.D. King		300	300
May 31	Total		$11,475	$ 8,200	$1,800	$1,475	$350

Purchase Journal Page 10
	Other Accounts DR
Date	Vendor Account Credited	Terms	Post. Ref.	Accounts Payable CR	Merchandise Inventory DR	Office Supplies DR	Account Title	Post. Ref.	Amount
2018
May 3	Henderson Co.	3/10, n/60		$ 2,900	$ 2,900
13	Magyar Inc.	n/EOM		500		$ 500
20	Silva Distributing	n/30		2,100	2,100
22	Henderson Co.	3/10, n/60		500			Furniture		$ 500
28	Magyar Inc.	2/10, n/30		575	575
May 31	Total			$ 6,575	$ 5,575	$ 500			$ 500

Cash Payments Journal Page 8
Date	Ck. No.	Account Debited	Post. Ref.	Other Accounts DR	Accounts Payable DR	Merchandise Inventory CR	Cash CR
2018
May 5	532	Furniture		$ 2,950			$ 2,950
10	533	Merchandise inventory		1,000			1,000
13	534	Henderson Co.			$ 2,900	$ 87	2,813
22	535	Prepaid Insurance		1,400			1,400
25	536	Utilities		550			550
30	537	Magyar Inc,			500		500
31	538	Salaries		2,250			2,250
May 31		Total		$ 8,150	$ 3,400	$ 87	$ 11,463

General Journal Page 6
Date	Description	Debit	Credit
2018
May 29	Magyar Inc.	$575
	Merchandise Inventory		$575
	Being damaged goods returned to the supplier

4Step 4: Posting to subsidiary ledgers Accounts Receivables subsidiary ledgers

Berkner Co.
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$ 0
9		$ 5,700		5,700
19			$ 5,700	0
29		2,400		2,400

M. O. Small
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$ 0
15		$850		850

K. D. King
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$ 0
2		$ 2,200		2,200
12			$ 2,200	0
18		300		300
31			300	0

Accounts payable subsidiary ledger

Henderson Co.
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$ 0
3			$ 2,900		2,900
13		$ 2,900			0
22			500		500

Magyar, Inc.
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$ 0
13			$ 500		500
28			575		1,075
29		$ 575			0
30		500			0

Silva Distributing
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$ 0
20			$ 2,100		2,100

5Step 5: Posting to General Ledger

Cash No. 111
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$15,000
31		$ 11,475		26,475
31			$ 11,463	15,012

Accounts Receivables No. 112
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$1,700
31		$ 11,450		13,150
31			$ 5,700	7,450
31			2,500	4,950

Merchandise Inventory No. 114
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$7,000
29			$ 575	6,425
31			350	6,075
31		$ 1,000		7,075
31		5,575		12,650
31			5,450	7,200
31			87	7,113

Office Supplies No. 116
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$600
13		$ 500		1,100
24			$ 125	975

Prepaid Insurance No. 117
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$0
22		$ 1,400		1,400

Furniture No. 151
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$2,200
5		$ 2,950		5,150

Accounts Payable No. 211
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$900
31			$ 6,575		7,475
31		$ 2,900			4,575
31		1,075			3,500

Sales Revenue No. 411
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$7,800
31			$ 11,450		19,250
31			1,800		21,050

Interest Revenue No. 419
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.				$1,300
31			$ 1,350		2,650

Cost of Goods Sold No. 511
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$2,800
31		$ 5,450		8,250
31		350		8,600

Salaries Expenses No. 531
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$1,900
31		$ 2,250		4,150

Utility Expenses No. 541
	Balance
Date	Post. Ref.	Debit	Credit	Debit	Credit
2018
May 1	Beg. Bal.			$200
25		$ 550		750

6Step 6: Showing trial balance

Trial Balance As on May 31, 2018
Account Name	Debit	Credit
Cash	$ 15,012
Accounts Receivables	4,950
Merchandise Inventory	7,113
Office Supplies	975
Prepaid Insurance	1,400
Furniture	5,150
Accounts Payable		$ 3,500
Sales Revenue		21,050
Interest Revenue		2,650
Cost of Goods sold	8,600
Salaries expenses	4,150
Utilities Expenses	750
Common Stock		10,000
Retained earnings		11,400
Total		$ 48,600