Q49CP - Horngren'S Financial And Managerial Accounting

Question

This problem continues the Canyon Canoe Company situation from Chapter 4. At the beginning of the new year, Canyon Canoe Company decided to carry and sell T-shirts with its logo printed on them. Canyon Canoe Company uses the perpetual inventory system to account for the inventory. During January 2019, Canyon Canoe Company completed the following merchandising transactions:

Jan. 1	Purchased 10 T-shirts at \(4 each and paid cash.
2	Sold 6 T-shirts for \)10 each, total cost of \(24. Received cash.
3	Purchased 50 T-shirts on account at \)5 each. Terms 2/10, n/30.
7	Paid the supplier for the T-shirts purchased on January 3, less discount.
8	Realized 4 T-shirts from the January 1 order were printed wrong and returned them for a cash refund.
10	Sold 40 T-shirts on account for \(10 each, total cost of \)200. Terms 3/15, n/45.
12	Received payment for the T-shirts sold on account on January 10, less discount.
14	Purchased 100 T-shirts on account at \(4 each. Terms 4/15, n/30.
18	Canyon Company called the supplier from the January 14 purchase and told them that some of the T-shirts were the wrong color. The supplier offered a \)50 purchase allowance.
20	Paid the supplier for the T-shirts purchased on January 14, less the allowance and discount.
21	Sold 60 T-shirts on account for \(10 each, total cost of \)220. Terms 2/20, n/30.
23	Received a payment on account for the T-shirts sold on January 21, less discount.
25	Purchased 320 T-shirts on account at \(5 each. Terms 2/10, n/30, FOB shipping point.
27	Paid freight associated with the January 25 purchase, \)48.
29	Paid for the January 25 purchase, less discount.
30	Sold 275 T-shirts on account for \(10 each, total cost of \)1,300. Terms 2/10, n/30.
31	Received payment for the T-shirts sold on January 30, less discount.

Requirements 

1. Open the following T-accounts in the ledger, using the post-closing balances from Chapter 4: Cash, Accounts Receivable, Merchandise Inventory, Estimated Returns Inventory, Office Supplies, Prepaid Rent, Land, Building, Accumulated Depreciation––Building, Canoes, Accumulated Depreciation––Canoes, Accounts Payable, Utilities Payable, Telephone Payable, Wages Payable, Refunds Payable, Interest Payable, Unearned Revenue, Notes Payable, Common Stock, Retained Earnings, Income Summary, Sales Revenue, Canoe Rental Revenue, Cost of Goods Sold, Rent Expense, Wages Expense, Utilities Expense, Telephone Expense, Supplies Expense, Depreciation Expense––Building, Depreciation Expense––Canoes, Interest Expense. 
2. Journalize and post the transactions. Compute each account balance, and denote the balance as Balance. Omit explanations.

Step-by-Step Solution

Answer

The total debit and credit side of the journal is $ 13,750.

Step 1: Meaning of Journal Entry

A journal entry is a record of financial transactions kept in the books of accounts of an organization. There are debit and credit columns, as well as a narration of each transaction.

Step 2: Preparing journal entries

Date	Particulars	Debit ($)	Credit ($)
Jan. 1	Merchandise Inventory                (10 × $4)	40
	Cash		40
Jan. 2	Cash                                            (6 × $10)	60
	Sales Revenue		60
	Cost of Goods Sold	24
	Merchandise Inventory		24
Jan. 3	Merchandise Inventory           (50 × $5.00)	250
	Accounts Payable		250
Jan. 7	Accounts Payable	250
	Cash                                    ($250  ̶  $5)		245
	Merchandise Inventory     ($250 × 0.02)		5
Jan. 8	Cash (4 × $4)	16
	Merchandise Inventory		16
Jan. 10	Accounts Receivable	388
	Sales Revenue		388
	Cost of goods sold	200
	Merchandise Inventory		200
Jan. 12	Cash	388
	Accounts Receivable		388
Jan. 14	Merchandise Inventory	400
	Accounts Payable		400
Jan. 18	Accounts Payable	50
	Merchandise Inventory		50
Jan. 20	Accounts Payable	350
	Cash		336
	Merchandise Inventory		14
Jan. 21	Accounts Receivable	588
	Sales Revenue		588
	Cash of goods sold	220
	Merchandise Inventory		220
Jan. 23	Cash	588
	Accounts Receivable		588
Jan. 25	Merchandise Inventory	1,600
	Accounts Payable		1,600
Jan. 27	Merchandise Inventory	48
	Cash		48
Jan. 29	Accounts Payable	1,600
	Cash		1,568
	Merchandise Inventory		32
Jan. 30	Accounts Receivable	2,695
	Sales Revenue		2,695
	Cash of goods sold	1,300
	Merchandise Inventory		1,300
Jan. 31	Cash	2,695
	Accounts Receivables		2,695

Step 3: Posting journal into ledger

Cash Account

Dr.	Cash Account		Cr.
Balance	12,125
Jan. 2	60	40	Jan.1
8	16	245	7
12	388	336	20
23	588	48	27
31	2,695	1,568	29
Balance	13,365

Accounts Receivable

Dr.	Accounts Receivable Account		Cr.
Balance	7,600
Jan. 10	388	388	Jan. 12
21	588	588	23
30	2,695	2,695	31
Balance	7,600

Merchandise Inventory

Dr.

Merchandise Inventory Account

Cr.

Balance	0
Jan. 1	40	24	Jan.2
3	250	5	7
14	400	16	8
25	1,600	200	10
27	48	50	18
		14	20
		220	21
		32	29
		1,300	30
Balance	477

Office Supplies

Dr.	Office Supplies Account		Cr
Balance	165

Prepaid Rent

Dr.	Prepaid Rent Account		Cr.
Balance	2,000

Land

Dr.	Land Account		Cr.
Balance	85,000

Building

Dr.	Building Account		Cr.
Balance	35,000

Accumulated Depreciation-Building

Dr.	Accumulated Depreciation-Building Account		Cr.
		500	Balance

Canoes

Dr.	Canoes Account		Cr.
Balance	12,000

Accumulated Depreciation-Canoes

Dr.	Accumulated Depreciation Canoes Account		Cr.
		350	Balance

Accounts Payable

Dr.	Accounts Payable Account		Cr.
		3,050	Balance
Jan. 7	250	250	Jan.3
18	50	400	14
20	350	1,600	25
29	1,600
		3,050	Balance

Utilities Payable

Dr.	Utilities Payable Account		Cr.
		295	Balance

Telephone Payable

Dr.	Telephone Payable Account		Cr.
		325	Balance

Wages Payable

Dr.	Wages Payable Account		Cr.
		1,250	Balance

Interest Payable 

Dr.	Interest Payable Account		Cr.
		50	Balance

Unearned Revenue

Dr.	Unearned Revenue Account		Cr.
		350	Balance

Notes Payable

Dr.	Notes Payable Account		Cr.
		7,200	Balance

Common Stock 

Dr.	Common Stock Account		Cr.
		136,000	Balance

Retained Earnings

Dr.	Retained Earnings Account		Cr.
		4,250	Balance

Sales Revenue

Dr.	Sales Revenue Account		Cr.
		0	Balance
		60	Jan. 2
		388	10
		588	21
		2,695	30
		3,731	Balance

Cost of goods sold

Dr.	Cost of goods sold Account		Cr.
Balance	0
Jan. 2	24
10	200
21	220
30	1,300
Balance	1,744