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Lasting Summer Inc. has $2,510 in the October 1 balance of the accounts receivable account consisting of $1,060 from Champion Co. and $1,450 from Wayfarer Co. Transactions related to revenue and cash receipts completed by Lasting Summer Inc. during the month of October 2016 are as follows: a. Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted. b. Prepare a listing of the accounts receivable customer balances and verify that the total of the accounts receivable customer balances equals the balance of the accounts receivable controlling account on October 31, 2016. c. Why does Lasting Summer Inc. use a subsidiary ledger for accounts receivable?

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Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436

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BuyFindarrow_forward

Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436
Chapter 5, Problem 10E
Textbook Problem
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Lasting Summer Inc. has $2,510 in the October 1 balance of the accounts receivable account consisting of $1,060 from Champion Co. and $1,450 from Wayfarer Co. Transactions related to revenue and cash receipts completed by Lasting Summer Inc. during the month of October 2016 are as follows:

Chapter 5, Problem 10E, Lasting Summer Inc. has 2,510 in the October 1 balance of the accounts receivable account consisting

  1. a. Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted.
  2. b. Prepare a listing of the accounts receivable customer balances and verify that the total of the accounts receivable customer balances equals the balance of the accounts receivable controlling account on October 31, 2016.
  3. c. Why does Lasting Summer Inc. use a subsidiary ledger for accounts receivable?

(a)

To determine

Prepare single column revenue journal and a cash receipts journal of L S Incorporation.

Explanation of Solution

Revenue journal: Revenue journal refers to the journal that is used to record the fees earned on account. In the revenue journal, all revenue transactions are recorded only when the business performed service to customer on account (credit).

Cash receipts journal: Cash receipts journal refers to the journal that is used to record the all transaction which is involve the cash receipts. For example, the business received cash from customer (service performed in cash).

Accounts receivable subsidiary ledger: Account receivable subsidiary ledger is the ledger which is used to post the customer transaction in one particular ledger account. It helps the business for locate the error in the customer ledger balance. After all transactions are posted, the balances in the accounts receivable subsidiary ledger should be totaled, and compare with the balance in the general ledger of accounts receivable. If both the balance does not agree, the error has been located and corrected.

Subsidiary ledger: Subsidiary ledger refers to the ledger that provides the detailed information of the account already recorded in the general ledger such as accounts receivable subsidiary ledger and accounts payable subsidiary ledger.

Revenue journal of L S Incorporation in the month of October is as follows:

Revenue journal

DateInvoice No.Account debitedPost Ref.

Account receivable Dr.

Fees earned Cr...

(b)

To determine

Prepare accounts receivable customers balance, and verify that the total agrees with the ending balance of accounts receivable control account.

(c)

To determine

Discuss the uses of subsidiary ledger for accounts receivable.

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Chapter 5 Solutions

Financial Accounting
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