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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
  

$  
  Cost of goods sold:


      
$  

      :





      


      :




  


  Selling and administrative expenses:


      


      


      


      


  




  :





  

$  





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:





     
$

  

$ 
     




     

  Stockholders' equity:







 Total current assets

    
$






 

    







 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