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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

CASH RECEIPTS TRANSACTIONS Color Florists, a retail business, had the following cash receipts during January 20--. The sales tax is 5%.

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REQUIRED

  1. 1. Record the transactions starting on page 20 of a general journal.
  2. 2. Post from the journal to the general ledger and accounts receivable ledger accounts. Use account numbers as shown in the chapter.

1.

To determine

Journalize the transactions related to cash receipt transactions.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journalize the transactions related to cash receipts.

Transaction on January 1:

Page: 20
DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
20--    
January1Cash101880 
   Accounts Receivable, RB122/✓ 880
  (Record cash received for sales on account)   

Table (1)

Description:

  • Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
  • Accounts Receivable, RB is an asset account. Since amount to be received has decreased, asset account decreased, and a decrease in asset is credited.

Transaction on January 3:

Page: 20
DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
20--    
January3Cash101271 
   Accounts Receivable, CH122/✓ 271
  (Record cash received for sales on account)   

Table (2)

Description:

  • Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
  • Accounts Receivable, CH is an asset account. Since amount to be received has decreased, asset account decreased, and a decrease in asset is credited.

Transaction on January 5:

Page: 20
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
January5Cash1012,940 
   Sales401 2,800
   Sales Tax Payable231 140
  (Record cash sales)   

Table (3)

Description:

  • Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
  • Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
  • Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 1:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $2,800×5%= $140

Working Note 2:

Compute cash amount (Refer to Working Note 1 for value of sales tax payable).

Cash = Sales+Sales tax payable= $2,800+$140= $2,940

Transaction on January 5:

Page: 20
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
January5Cash1011,222.20 
  Bank Credit Card Expense51337.80 
   Sales401 1,200.00
   Sales Tax Payable231 60.00
  (Record credit card sale)   

Table (4)

Description:

  • Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
  • Bank Credit Card Expense is an expense account. Since expenses and losses decrease equity, equity value is decreased, and a decrease in equity is debited.
  • Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
  • Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 3:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $1,200×5%= $60

Working Note 4:

Compute bank credit card expense amount (Refer to Working Note 3 for value of sales tax payable).

Bank credit card expense = {(Sales+Sales tax payable)×Bank credit card fee percentage}($1,200+$60)×3%= $37.80

Working Note 5:

Compute amount of cash received (Refer to Working Note 3 for value of sales tax payable and Working Note 4 for value of bank credit card expense).

Cash  = {(Sales+Sales tax payable)Bank credit card expense}($1,200.00+$60.00)$37.80= $1,222.20

Transaction on January 8:

Page: 20
DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
20--    
January8Cash101912 
   Accounts Receivable, JS122/✓ 912
  (Record cash received for sales on account)   

Table (5)

Description:

  • Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
  • Accounts Receivable, JS is an asset account. Since amount to be received has decreased, asset account decreased, and a decrease in asset is credited.

Transaction on January 11:

Page: 20
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
January11Sales Returns and Allowances401.140 
  Sales Tax Payable2312 
   Accounts Receivable, RB122/✓ 42
  (Record merchandise returned)   

Table (6)

Description:

  • Sales Returns and Allowances is a contra-revenue account, and contra-revenue accounts decrease the equity value, and a decrease in equity is debited.
  • Sales Tax Payable is a liability account. Since the payable decreased due to returns, the liability decreased, and a decrease in liability is debited.
  • Accounts Receivable, RB is an asset account. Since inventory is returned, amount to be received has decreased, asset account is decreased, and a decrease in asset is credited.

Working Note 6:

Compute sales tax payable amount.

Sales tax payable = Sales returns×Sales tax percentage= $40×5%= $2

Working Note 7:

Compute accounts receivable amount (Refer to Working Note 7 for value of sales tax payable).

Accounts receivable, RB = Sales returns+Sales tax payable= $40+$2= $42

Transaction on January 12:

Page: 20
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
January12Cash1013,255 
   Sales401 3,100
   Sales Tax Payable231 155
  (Record cash sales)   

Table (7)

Description:

  • Cash is an asset account

2.

To determine

Post the journalized entries into the accounts of the general ledger, and the customer accounts in accounts receivable ledger.

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