Wise Company completes these transactions during April of the current year (the terms of all its credit sales are 2y10, ny30).

Wise Company completes these transactions during April of the current year (the terms of all its credit sales are 2y10, ny30).

P7-1A Special journals, subsidiary ledgers, and schedule of accounts receivable—perpetual

P7-1A Wise Company completes these transactions during April of the current year (the terms of all its credit sales are 2y10, ny30).

Apr. 2 Purchased $13,300 of merchandise on credit from Negi Company, invoice dated April 2, terms 2y10, ny60.

3 Sold merchandise on credit to Brooke Sledd, Invoice No. 760, for $3,000 (cost is $2,000).

3 Purchased $1,380 of office supplies on credit from Madison, Inc. Invoice dated April 2, terms ny10 EOM.

4 Issued Check No. 587 to U.S. View for advertising expense, $999.

5 Sold merchandise on credit to Paul Kohr, Invoice No. 761, for $8,000 (cost is $6,500).

6 Received an $85 credit memorandum from Madison, Inc., for the return of some of the office supplies received on April 3.

9 Purchased $11,125 of store equipment on credit from Ned’s Supply, invoice dated April 9, terms ny10 EOM.

11 Sold merchandise on credit to Amy Nilson, Invoice No 762, for $9,500 (cost is $7,000).

12 Issued Check No. 588 to Negi Company in payment of its April 2 invoice, less the discount.

13 Received payment from Brooke Sledd for the April 3 sale, less the discount.

13 Sold $4,100 of merchandise on credit to Brooke Sledd (cost is $2,600), Invoice No. 763.

14 Received payment from Paul Kohr for the April 5 sale, less the discount.

16 Issued Check No. 589, payable to Payroll, in payment of sales salaries expense for the first half of the month, $9,750. Cashed the check and paid employees.

16 Cash sales for the first half of the month are $50,840 (cost is $33,880). (Cash sales are recorded daily from cash register data but are recorded only twice in this problem to reduce repetitive entries.)

17 Purchased $12,750 of merchandise on credit from Price Company, invoice dated April 17, terms 2y10, ny30.

18 Borrowed $50,000 cash from First State Bank by signing a long-term note payable.

20 Received payment from Amy Nilson for the April 11 sale, less the discount.

20 Purchased $730 of store supplies on credit from Ned’s Supply, invoice dated April 19, terms ny10 EOM.

23 Received a $400 credit memorandum from Price Company for the return of defective merchandise received on April 17.

23 Received payment from Brooke Sledd for the April 13 sale, less the discount.

25 Purchased $10,375 of merchandise on credit from Negi Company, invoice dated April 24, terms 2y10, ny60.

26 Issued Check No. 590 to Price Company in payment of its April 17 invoice, less the return and the discount.

27 Sold $3,070 of merchandise on credit to Paul Kohr, Invoice No. 764 (cost is $2,420).

27 Sold $5,700 of merchandise on credit to Amy Nilson, Invoice No. 765 (cost is $3,305).

30 Issued Check No. 591, payable to Payroll, in payment of the sales salaries expense for the last half of the month, $9,750.

30 Cash sales for the last half of the month are $70,975 (cost is $55,900).

Required

1. Prepare a sales journal like that in Exhibit 7.5 and a cash receipts journal like that in Exhibit 7.7. Number both journal pages as page 3. Then review the transactions of Wise Company and enter those that should be journalized in the sales journal and those that should be journalized in the cash receipts journal. Ignore any transactions that should be journalized in a purchases journal, a cash disbursements journal, or a general journal.

2. Open the following general ledger accounts: Cash, Accounts Receivable, Inventory, Long-Term Notes Payable, B. Wise, Capital, Sales, Sales Discounts, and Cost of Goods Sold. Enter the March 31 balances for Cash ($85,000), Inventory ($125,000), Long-Term Notes Payable ($110,000), and B. Wise, Capital ($100,000). Also open accounts receivable subsidiary ledger accounts for Paul Kohr, Brooke Sledd, and Amy Nilson.

3. Verify that amounts that should be posted as individual amounts from the journals have been posted. (Such items are immediately posted.) Foot and crossfoot the journals and make the month-end postings.

4. Prepare a trial balance of the general ledger and prove the accuracy of the subsidiary ledger by preparing a schedule of accounts receivable.

Analysis Component

5. Assume that the total for the schedule of Accounts Receivable does not equal the balance of the controlling account in the general ledger. Describe steps you would take to discover the error(s).

 TUTORIAL PREVIEW

CASH RECEIPTS JOURNAL										Page 3
					Sales	Accounts		Other	Cost of Goods Sold Dr. Inventory Cr.
				Cash	Discount	Receivable	Sales	Accts.
Date	Account Credited	Explanation	PR	Dr.	Dr.	Cr.	Cr.	Cr.
Apr. 13	Brooke Sledd	Sale of 4/3	ü	2,940	60	3,000
14	Paul Kohr	Sale of 4/5	ü	7,840	160	8,000
16	Sales	Cash Sales	ü	50,840			50,840		33,880

File name: P7-1A-wise-company.xls File type: XLS Price: $15

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

Current assets as of March 31:
Cash	$8,000
Accounts receivable	$20,000
Inventory	$36,000
Buildings and equipment, net	$120,000
Accounts payable	$21,750
Capital stock	$150,000
Retained earnings	$12,250

a. The gross margin is 25% of sales.

b. Actual and budgeted sales data:

March (actual)	$50,000
April	$60,000
May	$72,000
June	$90,000
July	$48,000

c. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.

d. Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold.

e. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

f. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets.)

g. Equipment costing $1,500 will be purchased for cash in April.

h. Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Requirement 1:

Complete the following schedule using the above data. (Omit the "$" sign in your response.)

Schedule of Expected Cash Collections
	April	May	June	Quarter
Cash sales	$36,000	$	$	$
Credit sales	20,000
Total collections	$56,000	$	$	$

Requirement 2:

Complete the following using the above data. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Omit the "$" sign in your response.)

Merchandise Purchases Budget
	April	May	June	Quarter
Budgeted cost of goods sold	$45,000	$54,000	$	$
Add desired ending inventory	43,200
Total needs	88,200
Less beginning inventory	36,000
Required purchases	$52,200	$	$	$

 

Schedule of Expected Cash Disbursements—Merchandise Purchases
	April	May	June	Quarter
March purchases	$21,750	$	$	$21,750
April purchases	26,100	26,100		52,200
May purchases
June purchases
Total disbursements	$47,850	$	$	$

Requirement 3:

Complete the following using the above data. (Omit the "$" sign in your response.)

Schedule of Expected Cash Disbursements—Selling and Administrative Expenses
	April	May	June	Quarter
Commissions	$7,200	$	$	$
Rent	2,500
Other expenses	3,600
Total disbursements	$13,300	$	$

Requirement 4:

Complete the following cash budget using the above data. (Leave no cells blank - be certain to enter "0" wherever required. Show deficiencies, repayments, Interest and total financing preceded by a minus sign wherever appropriate. Enter all other amounts as positive values. Omit the "$" sign in your response.)

Cash Budget
	April	May	June	Quarter
Cash balance, beginning	$8,000	$	$	$
Add cash collections	56,000
Total cash available	64,000
Less cash disbursements:
For inventory	47,850
For expenses	13,300
For equipment	1,500
Total cash disbursements	62,650
Excess (deficiency) of cash	1,350
Financing:
Borrowings
Repayments
Interest
Total financing
Cash balance, ending	$	$	$	$

Requirement 5:

Prepare an absorption costing income statement, for the quarter ended June 30. (Input all amounts as positive values. Omit the "$" sign in your response.)

Shilow Company Income Statement For the Quarter Ended June 30
(Click to select) Beginning inventory Goods available for sale Office expenses Sales Depreciation Ending inventory		$
Cost of goods sold:
(Click to select) Depreciation Office expenses Beginning inventory Ending inventory Goods available for sale Purchases	$
(Click to select) Add Less : (Click to select) Depreciation Administrative expenses Ending inventory Purchases Beginning inventory Office expenses
(Click to select) Office expenses Ending inventory Depreciation Purchases Beginning inventory Goods available for sale
(Click to select) Less Add : (Click to select) Administrative expenses Beginning inventory Purchases Ending inventory Office expenses Depreciation
(Click to select) Gross profit Gross loss
Selling and administrative expenses:
(Click to select) Other expenses Commissions Ending inventory Rent Beginning inventory Depreciation
(Click to select) Commissions Rent Ending inventory Beginning inventory Other expenses Depreciation
(Click to select) Other expenses Rent Beginning inventory Depreciation Ending inventory Commissions
(Click to select) Commissions Ending inventory Beginning inventory Rent Other expenses Depreciation
(Click to select) Net operating income Net operating loss
(Click to select) Less Add : (Click to select) Depreciation Budgeted cost of goods sold Beginning inventory Ending inventory Office expenses Interest expense
(Click to select) Net income Net loss		$

Requirement 6:

Prepare a balance sheet as of June 30. (Omit the "$" sign in your response.)

Shilow Company Balance Sheet June 30
Assets			Liabilities and Equity
Current assets:
(Click to select) Accounts receivable Inventory Sales Cash Accounts payable	$		(Click to select) Accounts receivable Inventory Bank loan payable Cash Accounts payable		$
(Click to select) Sales Accounts receivable Accounts payable Cash Inventory
(Click to select) Cash Accounts payable Accounts receivable Sales Inventory			Stockholders' equity:
Total current assets			(Click to select) Capital stock Retained earnings Accounts payable Inventory Accounts receivable	$
(Click to select) Current assets Building and equipment-net Cash Accounts receivable Inventory			(Click to select) Capital stock Accounts receivable Retained earnings Inventory Accounts payable
Total assets		$	Total liabilities and equity		$

 TUTORIAL PREVIEW

1.   Schedule of expected cash collections:

	April	May	June	Quarter
Cash sales........................................	$36,000	$43,200	$54,000	$  133,200
Credit sales*....................................	20,000	42,000	28,800	72,800
Total collections.............................	$56,000	$74,000	$82,800	$206,000

File name: Shilow-Company.doc File type: DOC Price: $10