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Chapter 1: AB-8SE (page 34)

Recording transactions in a purchases journal

Oct. 1 Purchased merchandise inventory on account with credit terms of 4/10,n/30 from Mayer Co., \(2,200.

11 Purchased office supplies on account from Bird Co., \)600. Terms were n/EOM.

24 Purchased furniture on account with credit terms of 3/10, n/60 from SillyCo., $900.

Use the following purchases journal to record the preceding transactions.

Purchase Journal Page 6

Other Accounts DR

Date

Vendor Account Credited

Terms

Post. Ref.

Accounts Payable CR

Merchandise Inventory DR

Office Supplies DR

Account Title

Post. Ref.

Amount

2018

Short Answer

Expert verified

Total amount payable to the creditors is$3,700.

Step by step solution

01

Purchase Journal

A purchase journal is a special-purpose book for recording all types of purchases on account. A business may purchase several things like merchandise, office supplies, furniture, building, equipment, etc. When these items are purchased on the account then the transactions are recorded in the purchase journal.

02

Transaction recording in the purchase journal

Purchase Journal Page 6

Other Accounts DR

Date

Vendor Account Credited

Terms

Post. Ref.

Accounts Payable CR

Merchandise Inventory DR

Office Supplies DR

Account Title

Post. Ref.

Amount

2018

Oct 1

Mayer Co.

4/10, n/30

$2,200

$2,200

11

Bird Co.

n/EOM

$600

$600

24

Silly Co.

3/10, n/60

$900

Furniture

$900

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Most popular questions from this chapter

In Vogue, a T-shirt business, is growing fast and needs a better accounting information system. Consider the features of an effective system. Which features are most important? Why? Which feature must you consider if your financial resources are limited?

Abby Perry recently opened her own law office on December 1, which she operates as a corporation. The name of the new entity is Abby Perry, Attorney. Perry experienced the following events during the organizing phase of the new business and its first month of operation, December 2018. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business. Dec. 1 Sold personal investment in Nike stock, which she had owned for several years, receiving \(30,000 cash. 2 Deposited the \)30,000 cash from the sale of the Nike stock in her personal bank account. 3 Deposited \(89,000 cash in a new business bank account titled Abby Perry, Attorney. The business issued common stock to Perry. 5 Paid \)600 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, \(8,000, within three months. 9 Received \)2,900 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, \(300. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, \)8,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, \(900. 31 Received \)2,800 cash from clients billed on Dec. 23. 31 Cash dividends of $3,000 were paid to stockholders. Requirements 1. Analyze the effects of the preceding events on the accounting equation of Abby Perry, Attorney. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet. d. Statement of cash flows.

Preparing the balance sheet Requirements 1. Prepare the balance sheet for Wilson Towing Service as of June 30, 2018. 2. What does the balance sheet report?

Presented here are the accounts of Pembroke Bookkeeping Company for the year ended December 31, 2018: Land \( 10,000 Common Stock \) 29,000 Notes Payable 31,000 Accounts Payable 7,000 Property Tax Expense 3,100 Accounts Receivable 1,200 Dividends 28,000 Advertising Expense 12,000 Rent Expense 7,000 Building 147,400 Salaries Expense 64,000 Cash 2,800 Salaries Payable 800 Equipment 15,000 Service Revenue 192,000 Insurance Expense 1,700 Office Supplies 12,000 Interest Expense 6,600 Retained Earnings, Dec. 31, 2017 51,000 Requirements 1. Prepare Pembroke Bookkeeping Company’s income statement. 2. Prepare the statement of retained earnings. 3. Prepare the balance sheet.

Let’s examine a case using Greg’s Tunes and Sal’s Silly Songs. It is now the end of the first year of operations, and the stockholders want to know how well each business came out at the end of the year. Neither business kept complete accounting records, and no dividends were paid. The businesses throw together the data shown on the next page at year-end: \( 23,000 8,000 35,000 22,000 \) 10,000 6,000 44,000 9,000 Total Assets Common Stock Total Revenues Total Expenses Greg’s Tunes: Sal’s Silly Songs: Total Liabilities Common Stock Total Expenses Net Income To gain information for evaluating the businesses, the stockholders ask you several questions. For each answer, you must show your work to convince the stockholders that you know what you are talking about.

Requirements 2. Which business owes more to creditors?

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