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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Purchases and cash payments journals; accounts payable subsidiary and general ledgers

AquaFresh Water Testing Service was established on April 16, 2016. AquaFresh uses field equipment and field supplies (chemicals and other supplies) to analyze water for unsafe contaminants in streams, lakes, and ponds. Transactions related to purchases and cash payments during the remainder of April are as follows:

April 16. Issued Check No. 1 in payment of rent for the remainder of April, $3,500.

16. Purchased field supplies on account from Hydro Supply Co., $5,340.

16. Purchased field equipment on account from Pure Equipment Co., $21,450.

17. Purchased office supplies on account from Best Office Supply Co., $510.

19. Issued Check No. 2 in payment of field supplies, $3,340, and office supplies, $400.

Post the journals to the accounts payable subsidiary ledger.

23. Purchased office supplies on account from Best Office Supply Co., $660.

23. Issued Check No. 3 to purchase land, $140,000.

24. Issued Check No. 4 to Hydro Supply Co. in payment of April 16 invoice, $5,340.

26. Issued Check No. 5 to Pure Equipment Co. in payment of April 16 invoice, $21,450.

Post the journals to the accounts payable subsidiary ledger.

30. Acquired land in exchange for field equipment having a cost of $12,000.

30. Purchased field supplies on account from Hydro Supply Co., $7,650.

30. Issued Check No. 6 to Best Office Supply Co. in payment of April 17 invoice, $510.

30. Purchased the following from Pure Equipment Co. on account: field supplies, $1,340, and field equipment, $4,700.

30. Issued Check No. 7 in payment of salaries, $29,400.

Post the journals to the accounts pay able subsidiary ledger.

Instructions

1. Journalize the transactions for April. Use a purchases journal and a cash payments journal, similar to those illustrated in this chapter, and a two-column general journal. Use debit columns for Field Supplies, Office Supplies, and Other Accounts in the purchases journal. Refer to the following partial chart of accounts:

11 Cash 19 Land
14 Field Supplies 21 Accounts Payable
15 Office Supplies 61 Salary Expense
17 Field Equipment 71 Rent Expense

At the points indicated in the narrative of transactions, post to the following accounts in the accounts payable subsidiary ledger:

Best Office Supply Co.

Hydro Supply Co.

Pure Equipment Co.

2. Post the individual entries (Other Accounts columns of the purchases journal and the cash payments journal and both columns of the general journal) to the appropriate general ledger accounts.

3. Total each of the columns of the purchases journal and the cash payments journal, and post the appropriate totals to the general ledger. (Because the problem does not include transactions related to cash receipts, the cash account in the ledger will have a credit balance.)

4. Prepare a schedule of the accounts payable creditor balances.

5. Why might AquaFresh consider using a subsidiary ledger for the field equipment?

1.

To determine

General Ledger

General ledger refers to the ledger that records all the transactions of the business related to the company’s assets, liabilities, owners’ equities, revenues, and expenses. Each subsidiary ledger is represented in the general ledger by summarizing the account.

Accounts payable control account and subsidiary ledger:

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

Purchase journal:

Purchase journal refers to the journal that is used to record all purchases on account. In the purchase journal, all purchase transactions are recorded only when the business purchased the goods on account. For example, the business purchased cleaning supplies on account.

Cash payments journal:

Cash payments journal refers to the journal that is used to record all transaction which involves the cash payments. For example, the business paid cash to employees (salary paid to employees).

To Prepare: A single column revenue journal and cash receipt journal, and post the accounts in the accounts payable subsidiary ledger.

Explanation

Purchase journal

Purchase journal of Company AF in the month of April, 2016 is as follows:

Figure (1)

Cash payment journal

Cash payment journal of Company AF in the month of April is as follows:

Cash payment journal

Date Check No. Account debited Post Ref. Other accounts Dr. Accounts payable Dr. Cash Dr.
2016              
Apr. 16 1 Rent expense 71 3,500   3,500
  19 2 Field supplies 14 3,340   3,340
      Office supplies 15 400   400
  23 3 Land 19 140,000   140,000
  24 4
  • HS Company
✓     5,340 5,340
  26 5
  • P Equipment Company
✓     21,450 21,450
  30 6
  • BO Supply Company
✓     510 510
  30 7 Salary expense 61 29,400 29,400
  30       176,640 27,300 203,940
          (21) (11)

Table (1)

Accounts payable subsidiary ledger

Name: BO Supply Company
Date Item Post...

2. and 3.

To determine

To post: The individual entries to the appropriate general ledger accounts.

4.

To determine

To prepare: The accounts payable creditor balances.

5.

To determine

To discuss: The reason for using subsidary ledger for the field equipment.

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