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CHAPTER
7 Accounting for Sales
and Accounts Receivable

Chapter Opener: Students should recognize that technology has been an important factor in
Thinking Critically the success of a direct merchant like Lands’ End. As a direct merchant, Lands’
End customers shop directly with them—from home or office, by phone,
mail, fax or Web. The company ships directly to its customers. In addition to
lower prices, their direct merchant method of doing business makes shopping
simpler, faster and more convenient.

Fast Facts ❏ The company employs more than 9,000 associates during peak seasons.
❏ Lands' End was the first apparel company to offer an innovative shopping
tool where customers can create a 3-D model of an order to “try on”
clothing on-line.
❏ Lands' End offers GUARANTEED. PERIOD.®—which allows customers to
return items at any time, for any reason, for a full refund of the purchase
price or a replacement.
❏ Lands' End has been recognized as one of Fortune's “100 Best Companies
to Work For.”
❏ The apostrophe in Lands' End is in the wrong place—it was a printing
error from the first ad piece--since Gary Comer, the company founder,
couldn't afford to have the piece reprinted, he decided to simply change
the name of the business to correspond to the printed piece.

Managerial A company which fails to maintain up-to-date accounts receivable records

Implications: may face the following:
Thinking Critically
❏ Customer dissatisfaction: Businesses who extend credit to their customers
risk customer dissatisfaction if accounts are not updated frequently.
❏ Ineffective collection efforts: Effective accounts receivable collection efforts
rely on accurate account balances.
❏ Cash flow: Negative cash flow situations may stem from improper mainte-
nance of accounts receivable or from delayed accounts receivable billings.

Discussion These questions are designed to check students’ understanding of the new
Questions terms, concepts, and procedures presented in the chapter.

1.
Retail: sell goods directly to consumers. Wholesale: sell goods to retailers.
2.
Prove balances, summarize receivables.
3.
Subtract balance of Sales Returns and Allowances from balance of Sales.
4.
Separate record of returns and allowances.
5.
Contra revenue account.
6.
Compare totals of debit and credit columns.
7.
Time of sale; Sales Tax Payable.
8.
Divide total of Sales account by 105 percent, multiply by sales tax rate.
9.
a. Debit Accounts Receivable, credit Sales, b. Debit Accounts Receivable from
Credit Card Companies, credit Sales.
10. Summaries of credit card sales submitted to the credit card company for
payment.
11. The credit card company.

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12. Fee charged by banks to retailers for the privilege of allowing their
customers to use bank credit cards; expense account.
13. No responsibility for collecting cash from customer exists.
14. Purchase amount to be paid at a later date.
15. A reduction from the list price, offered by wholesalers; attracts customers.

EXERCISE 7.1
1. Sales journal 5. General journal
2. General journal 6. Cash receipts journal
3. Cash receipts journal 7. Cash receipts journal
4. Purchases journal 8. Cash payments journal

EXERCISE 7.2
Dr. Cr. Dr. Cr.
1. 111 401, 231 4. 101 401, 231
2. 101 111 5. 451, 231 111
3. 451, 231 111 6. 451, 231 101

EXERCISE 7.3

SALES JOURNAL 18
PAGE __________

SALES POST. ACCOUNTS SALES TAX SALES

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE PAYABLE CREDIT
NO. DEBIT CREDIT

1 2010 1

2 May 1 1101 Roy Anderson 3 7 9 00 2 5 00 3 5 4 00 2

3 2 1102 John Amos 2 7 2 00 1 8 00 2 5 4 00 3

4 3 1103 Teresa Wells 3 1 4 00 2 1 00 2 9 3 00 4

5 5

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EXERCISE 7.4

GENERAL JOURNAL 15
PAGE __________

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

1 2010 1

2 June 7 Sales Returns and Allowances 3 0 0 00 2

3 Sales Tax Payable 2 4 00 3

4 Accounts Receivable/Deborah Westgate 3 2 4 00 4

5 Accepted a return of defective merchandise, 5

6 Credit Memo 301; original sale made on 6

7 Sales Slip 1610, May 31 7

8 8

9 22 Sales Returns and Allowances 4 5 0 00 9

10 Sales Tax Payable 3 6 00 10

11 Accounts Receivable/Brian Barnett 4 8 6 00 11

12 Gave an allowance for damaged merchandise, 12

13 Credit Memo 121; original sale made on 13

14 Sales Slip 1663, June 17 14

15 15

EXERCISE 7.5

1. The $6,480 debit is posted to Accounts Receivable (111). July 31 is entered in the date column, S1 in the Post.
Ref. column, and $6,480 in the Debit column. The balance is increased by this amount.

2. The $480 credit is posted to Sales Tax Payable (231). July 31 is entered in the Date column, S1 in the Post. Ref.
column, and $480 in the Credit column. The balance is increased by this amount.

3. The $6,000 credit is posted to Sales (401). July 31 is entered in the Date column, S1 in the Post. Ref. column,
and $6,000 in the Credit column. The balance is increased by this amount.

4. Individual entries are posted as a debit to customers’ accounts in the accounts receivable ledger, usually on a
daily basis. A ✔ in the sales journal indicates that amounts have been posted.

EXERCISE 7.6

1. $500  $200  $300

2. $790  $316  $474
3. $130  $26  $104

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EXERCISE 7.7

1. $3,340  $1,002  $2,338; $2,338  $233.80  $2,104.20

2. $4,720  $1,416  $3,304; $3,304  $330.40  $2,973.60
3. $1,120  $224  $896; $896  $89.60  $806.40

EXERCISE 7.8

GENERAL JOURNAL PAGE __________

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

1 2010 1

2 Apr. 30 Sales Tax Payable 11 2 7 0 00 2

3 Cash 11 2 7 0 00 3

4 Remitted 5% sales tax on sales of $225,400 4

5 5

EXERCISE 7.9
The Jean Barn
Schedule of Accounts Receivable
January 31, 2010

Cheryl Amos 2 1 1 5 00
Edward Cooke 2 8 3 00
Neal Fitzgerald 7 5 6 00
David Pifer 1 2 2 4 00
Lisa Stanton 2 7 0 0 00
Nikki Whitaker 2 0 5 2 00
Total 9 1 3 0 00

Balance of Accounts Receivable: $9,130.00

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EXERCISE 7.10

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Mar. 1 Balance ✔ 1 1 8 8 00
14 J42 3 2 4 00 8 6 4 00
22 J42 1 0 8 00 7 5 6 00

Sales Tax Payable

ACCOUNT ________________________________________________________________ 231
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Mar. 14 J42 2 4 00 2 4 00
22 J42 8 00 3 2 00

Sales Returns and Allowances

ACCOUNT ________________________________________________________________ 451
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Mar. 14 J42 3 0 0 00 3 0 0 00
22 J42 1 0 0 00 4 0 0 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Cara Fountain
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Mar. 1 Balance ✔ 5 4 0 00
14 Credit Memo 101 J42 3 2 4 00 2 1 6 00

Sadie Palmer
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Mar. 1 Balance ✔ 6 4 8 00
22 Credit Memo 102 J42 1 0 8 00 5 4 0 00

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PROBLEM 7.1A

SALES JOURNAL 7
PAGE __________

SALES POST. ACCOUNTS SALES TAX SALES

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE PAYABLE CREDIT
NO. DEBIT CREDIT

1 2010 1

2 July 1 501 Bonnie Franklin 9 1 8 00 6 8 00 8 5 0 00 2

3 6 502 Janet Judge 2 8 3 5 00 2 1 0 00 2 6 2 5 00 3

4 11 503 Raymond Clay 2 8 0 8 00 2 0 8 00 2 6 0 0 00 4

5 17 504 Melissa Gray 9 7 2 00 7 2 00 9 0 0 00 5

6 23 505 Angela Nguyen 5 4 0 00 4 0 00 5 0 0 00 6

7 27 506 Clifton Wallace 1 7 2 8 00 1 2 8 00 1 6 0 0 00 7

8 29 507 Sally Wei 1 4 0 4 00 1 0 4 00 1 3 0 0 00 8

9 31 508 Ken Holt 4 3 2 00 3 2 00 4 0 0 00 9

10 31 Totals 11 6 3 7 00 8 6 2 00 10 7 7 5 00 10

11 ( 1 1 1 )00 ( 2 3 1 )00 ( 4 0 1 )0 11

12 12

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
July 1 Balance ✔ 31 4 0 0 00
31 S8 11 6 3 7 00 43 0 3 7 00

Sales Tax Payable

ACCOUNT ________________________________________________________________ 231
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
July 31 S8 8 6 2 00 8 6 2 00

Sales
ACCOUNT ________________________________________________________________ 401
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
July 31 S8 10 7 7 5 00 10 7 7 5 00

Analyze: 38.98% of credit sales were from entertainment items. ($4,200  $10,775  38.98%)

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PROBLEM 7.2A

SALES JOURNAL 8
PAGE __________

SALES POST. ACCOUNTS SALES TAX SALES

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE PAYABLE CREDIT
NO. DEBIT CREDIT

1 2010 1

2 Feb. 1 1615 Julia Cheng 3 5 1 0 00 2 6 0 00 3 2 5 0 00 2

3 5 1616 Denise de la Hoya 2 2 6 8 00 1 6 8 00 2 1 0 0 00 3

4 9 1617 Suzanne Tuttle 5 9 4 0 00 4 4 0 00 5 5 0 0 00 4

5 17 1618 Joan Clay 5 8 3 2 00 4 3 2 00 5 4 0 0 00 5

6 23 1619 Thomas Muir 3 6 7 2 00 2 7 2 00 3 4 0 0 00 6

7 27 1620 Bernard Slaughter 4 2 9 3 00 3 1 8 00 3 9 7 5 00 7

8 28 1621 Connie Taylor 1 9 4 4 00 1 4 4 00 1 8 0 0 00 8

9 28 1622 James Walker 3 9 4 2 00 2 9 2 00 3 6 5 0 00 9

10 28 Totals 31 4 0 1 00 2 3 2 6 00 29 0 7 5 00 10

11 ( 1 1 1 )00 ( 2 3 1 )00 ( 4 0 1 )0 11

12 12

GENERAL JOURNAL 24
PAGE __________

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

1 2010 1

2 Feb. 11 Sales Returns and Allowances 451 7 0 0 00 2

3 Sales Tax Payable 231 5 6 00 3

111
4 Accounts Receivable/Denise de la Hoya ✔ 7 5 6 00 4

5 Accepted return of damaged chair, 5

6 Credit Memo 702; original sale made 6

7 on Sales Slip 1616, February 5 7

8 8

9 25 Sales Returns and Allowances 451 4 0 0 00 9

10 Sales Tax Payable 231 3 2 00 10

111
11 Accounts Receivable/Joan Clay ✔ 4 3 2 00 11

12 Gave allowance for damaged bookcases, 12

13 Credit Memo 703; original sale 13

14 made on Sales Slip 1618, February 17 14

15 15

16 16

17 17

18 18

19 19

20 20

21 21

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PROBLEM 7.2A (continued)

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 1 Balance ✔ 15 6 3 6 00
11 J24 7 5 6 00 14 8 8 0 00
25 J24 4 3 2 00 14 4 4 8 00
28 S8 31 4 0 1 00 45 8 4 9 00

Sales Tax Payable

ACCOUNT ________________________________________________________________ 231
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 1 Balance ✔ 7 1 7 0 00
11 J24 5 6 00 7 1 1 4 00
25 J24 3 2 00 7 0 8 2 00
28 S8 2 3 2 6 00 9 4 0 8 00

Sales
ACCOUNT ________________________________________________________________ 401
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 28 S8 29 0 7 5 00 29 0 7 5 00

Sales Returns and Allowances

ACCOUNT ________________________________________________________________ 451
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 11 J24 7 0 0 00 7 0 0 00
25 J24 4 0 0 00 1 1 0 0 00

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PROBLEM 7.2A (continued)

Spectra Furniture
Income Statement (Partial)
Month Ended February 28, 2010

Revenue
Sales 29 0 7 5 00
Less Sales Returns and Allowances 1 1 0 0 00
Net Sales 27 9 7 5 00

Analyze: Net sales for January were $89,625 (Sales tax $7,170  Rate 0.08  $89,625).

PROBLEM 7.3A
SALES JOURNAL 6
PAGE __________

SALES POST. ACCOUNTS SALES TAX SALES

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE PAYABLE CREDIT
NO. DEBIT CREDIT

1 2010 1

2 Nov. 1 1001 Pauline Judge ✔ 1 6 2 0 00 1 2 0 00 1 5 0 0 00 2

3 5 1002 Janet Hutchinson ✔ 2 2 6 8 00 1 6 8 00 2 1 0 0 00 3

4 6 1003 Charles Brown ✔ 7 5 6 00 5 6 00 7 0 0 00 4

5 10 1004 Lisa Morgan ✔ 1 8 3 6 00 1 3 6 00 1 7 0 0 00 5

6 14 1005 Dorothy Watts ✔ 5 9 4 00 4 4 00 5 5 0 00 6

7 21 1006 Winnie Wu ✔ 3 4 5 6 00 2 5 6 00 3 2 0 0 00 7

8 24 1007 Henry Okafor ✔ 6 4 8 00 4 8 00 6 0 0 00 8

9 30 1008 Euline Brock ✔ 4 1 0 4 00 3 0 4 00 3 8 0 0 00 9

10 30 Totals 15 2 8 2 00 1 1 3 2 00 14 1 5 0 00 10

11 ( 1 1 1 )00 ( 2 3 1 )00 ( 4 0 1 )0 11

12 12

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PROBLEM 7.3A (continued)

GENERAL JOURNAL 18
PAGE __________

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

1 2010 1

2 Nov. 17 Sales Returns and Allowances 451 1 5 0 00 2

3 Sales Tax Payable 231 1 2 00 3

111
4 Accounts Receivable/Lisa Morgan ✔ 1 6 2 00 4

5 Accepted return of broken glass, 5

6 Credit Memo 102; original sale made on 6

7 Sales Slip 1004, November 10 7

8 8

9 25 Sales Returns and Allowances 451 3 5 0 00 9

10 Sales Tax Payable 231 2 8 00 10

111
11 Accounts Receivable/Winnie Wu ✔ 3 7 8 00 11

12 Gave allowance for damaged coffee table, 12

13 Credit Memo 103; original sale made on Sales 13

14 Slip 1006, November 21 14

15 15

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Nov. 17 J16 1 6 2 00 1 6 2 00
25 J16 3 7 8 00 5 4 0 00
30 S6 15 2 8 2 00 14 7 4 2 00

Sales Tax Payable

ACCOUNT ________________________________________________________________ 231
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Nov. 17 J16 1 2 00 1 2 00
25 J16 2 8 00 4 0 00
30 S6 1 1 3 2 00 1 0 9 2 00

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PROBLEM 7.3A (continued)

GENERAL LEDGER
Sales
ACCOUNT ________________________________________________________________ 401
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Nov. 30 S6 14 1 5 0 00 14 1 5 0 00

Sales Returns and Allowances

ACCOUNT ________________________________________________________________ 451
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Nov. 17 J16 1 5 0 00 1 5 0 00
25 J16 3 5 0 00 5 0 0 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Euline Brock
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Nov. 30 Sales Slip 1008 S6 4 1 0 4 00 4 1 0 4 00

Charles Brown
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Nov. 6 Sales Slip 1003 S6 7 5 6 00 7 5 6 00

Janet Hutchinson
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Nov. 5 Sales Slip 1002 S6 2 2 6 8 00 2 2 6 8 00

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PROBLEM 7.3A (continued)

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Pauline Judge
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Nov. 1 Sales Slip 1001 S6 1 6 2 0 00 1 6 2 0 00

Lisa Morgan
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Nov. 10 Sales Slip 1004 S6 1 8 3 6 00 1 8 3 6 00
17 Credit Memo 102 J16 1 6 2 00 1 6 7 4 00

Henry Okafor
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Nov. 24 Sales Slip 1007 S6 6 4 8 00 6 4 8 00

Dorothy Watts
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Nov. 14 Sales Slip 1005 S6 5 9 4 00 5 9 4 00

Winnie Wu
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Nov. 21 Sales Slip 1006 S6 3 4 5 6 00 3 4 5 6 00
25 Credit Memo 103 3 7 8 00 3 0 7 8 00

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PROBLEM 7.3A (continued)

The Dining Elegance China Shop

Schedule of Accounts Receivable
November 30, 2010

Euline Brock 4 1 0 4 00
Charles Brown 7 5 6 00
Janet Hutchinson 2 2 6 8 00
Pauline Judge 1 6 2 0 00
Lisa Morgan 1 6 7 4 00
Henry Okafor 6 4 8 00
Dorothy Watts 5 9 4 00
Winnie Wu 3 0 7 8 00
Total 14 7 4 2 00

Balance of Accounts Receivable account: $14,742.00

Analyze: Euline Brock ($4,104).

PROBLEM 7.4A

SALES JOURNAL 7
PAGE __________

SALES POST. ACCOUNTS

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE DR./
NO. SALES CR.

1 2010 1

2 Jan. 3 1081 Thomas Florist ✔ 5 0 0 00 2

3 8 1082 Carter Garden Supply ✔ 7 7 5 00 3

4 9 1083 Thomasville Flower Shop ✔ 4 6 2 00 4

5 10 1084 Moore’s Flower Shop ✔ 5 3 0 00 5

6 20 1085 Cedar Hill Floral Shop ✔ 4 8 0 00 6

7 22 1086 Applegate Nursery ✔ 6 8 0 00 7

8 25 1087 Moore’s Flower Shop ✔ 4 2 7 00 8

9 27 1088 Thomas Florist ✔ 9 2 5 00 9

10 31 Total 4 7 7 9 00 10

11 (1 1 1/ 4 01) 11

12 12

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PROBLEM 7.4A (continued)

GENERAL JOURNAL 11
PAGE __________

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

1 2010 1

2 Jan. 15 Sales Returns and Allowances 451 5 0 00 2

111
3 Accounts Receivable/Thomasville Flower Shop ✔ 5 0 00 3

4 Accepted return of damaged merchandise, 4

5 Credit Memo 101; original sale made 5

6 on Invoice 1083, January 9 6

7 7

8 31 Sales Returns and Allowances 451 1 5 0 00 8

111
9 Accounts Receivable/Thomas Florist ✔ 1 5 0 00 9

10 Gave allowance for damaged merchandise, 10

11 Credit Memo 102; original sale made 11

12 on Invoice 1088, January 27 12

13 13

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Jan. 15 J11 5 0 00 5 0 00
31 J11 1 5 0 00 2 0 0 00
31 S7 4 7 7 9 00 4 5 7 9 00

Sales
ACCOUNT ________________________________________________________________ 401
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Jan. 31 S7 4 7 7 9 00 4 7 7 9 00

Sales Returns and Allowances

ACCOUNT ________________________________________________________________ 451
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Jan. 15 J11 5 0 00 5 0 00
31 J11 1 5 0 00 2 0 0 00

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PROBLEM 7.4A (continued)

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Applegate Nursery
NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Jan. 22 Invoice 1086 S7 6 8 0 00 6 8 0 00

Carter Garden Supply

NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Jan. 8 Invoice 1082 S7 7 7 5 00 7 7 5 00

Cedar Hill Floral Shop

NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Jan. 20 Invoice 1085 S7 4 8 0 00 4 8 0 00

Moore’s Flower Shop

NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Jan. 10 Invoice 1084 S7 5 3 0 00 5 3 0 00
25 Invoice 1087 S7 4 2 7 00 9 5 7 00

Thomas Florist
NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Jan. 3 Invoice 1081 S7 5 0 0 00 5 0 0 00
27 Invoice 1088 S7 9 2 5 00 1 4 2 5 00
31 Credit Memo 102 J11 1 5 0 00 1 2 7 5 00

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PROBLEM 7.4A (continued)

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Thomasville Flower Shop
NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Jan. 9 Invoice 1083 S7 4 6 2 00 4 6 2 00
15 Credit Memo 101 J11 5 0 00 4 1 2 00

Special Occasions Flower Shop

Schedule of Accounts Receivable
January 31, 2010

Applegate Nursery 6 8 0 00
Carter Garden Supply 7 7 5 00
Cedar Hill Floral Shop 4 8 0 00
Moore’s Flower Shop 9 5 7 00
Thomas Florist 1 2 7 5 00
Thomasville Flower Shop 4 1 2 00
Total 4 5 7 9 00

Balance of Accounts Receivable account: $4,579.00

Analyze: Damaged goods decreased net sales revenue by $200.00 and by 4% ($200  $4,779  .04).

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PROBLEM 7.1B

SALES JOURNAL 8
PAGE __________

SALES POST. ACCOUNTS SALES TAX SALES

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE PAYABLE CREDIT
NO. DEBIT CREDIT

1 2010 1

2 June 1 201 Barbara Merino 8 1 0 00 6 0 00 7 5 0 00 2

3 6 202 David Reed 1 1 3 4 00 8 4 00 1 0 5 0 00 3

4 11 203 Brenda Davis 2 8 0 8 00 2 0 8 00 2 6 0 0 00 4

5 17 204 Beatrice Wilson 9 7 2 00 7 2 00 9 0 0 00 5

6 23 205 Doris Lazo 5 4 0 00 4 0 00 5 0 0 00 6

7 27 206 Carol West 1 2 9 6 00 9 6 00 1 2 0 0 00 7

8 29 207 Rickey Eddie 1 6 2 0 00 1 2 0 00 1 5 0 0 00 8

9 30 208 Bridgette Nelson 6 4 8 00 4 8 00 6 0 0 00 9

10 30 Totals 9 8 2 8 00 7 2 8 00 9 1 0 0 00 10

11 ( 1 1 1 )00 ( 2 3 1 )00 ( 4 0 1 )0 11

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
June 1 Balance ✔ 72 8 0 0 00
30 S8 9 8 2 8 00 82 6 2 8 00

Sales Tax Payable

ACCOUNT ________________________________________________________________ 231
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
June 30 S8 7 2 8 00 7 2 8 00

Sales
ACCOUNT ________________________________________________________________ 401
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
June 30 S8 9 1 0 0 00 9 1 0 0 00

Analyze: 41.76% of credit sales were for entertainment items. ($3,800  $9,100  41.76%)

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PROBLEM 7.2B

SALES JOURNAL 9
PAGE __________

SALES POST. ACCOUNTS SALES TAX SALES

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE PAYABLE CREDIT
NO. DEBIT CREDIT

1 2010 1

2 June 1 1601 Christine Berry 2 2 1 4 00 1 6 4 00 2 0 5 0 00 2

3 5 1602 Paula Adams 1 4 0 4 00 1 0 4 00 1 3 0 0 00 3

4 9 1603 Patrick Chen 7 5 6 0 00 5 6 0 00 7 0 0 0 00 4

5 17 1604 Raul Alvarez 4 3 2 0 00 3 2 0 00 4 0 0 0 00 5

6 23 1605 Kenitra Brown 4 1 0 4 00 3 0 4 00 3 8 0 0 00 6

7 27 1606 Charles Brown 3 8 8 8 00 2 8 8 00 3 6 0 0 00 7

8 29 1607 Rosetta London 1 3 5 0 00 1 0 0 00 1 2 5 0 00 8

9 30 1608 James Howard 3 3 4 8 00 2 4 8 00 3 1 0 0 00 9

10 30 Totals 28 1 8 8 00 2 0 8 8 00 26 1 0 0 00 10

11 ( 1 1 1 )00 ( 2 3 1 )00 ( 4 0 1 )0 11

12 12

GENERAL JOURNAL 26
PAGE __________

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

1 2010 1

2 June 11 Sales Returns and Allowances 451 4 0 0 00 2

3 Sales Tax Payable 231 3 2 00 3

111
4 Accounts Receivable/Paula Adams ✔ 4 3 2 00 4

5 Accepted return of damaged chair, 5

6 Credit Memo 215; original sale made 6

7 on Sales Slip 1602, June 5 7

8 8

9 25 Sales Returns and Allowances 451 2 5 0 00 9

10 Sales Tax Payable 231 2 0 00 10

111
11 Accounts Receivable/Raul Alvarez ✔ 2 7 0 00 11

12 Gave allowance for damages bookcases, 12

13 Credit Memo 216; original sale 13

14 made on Sales Slip 1604, June 17 14

15 15

16 16

17 17

18 18

19 19

20 20

21 21

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PROBLEM 7.2B (continued)

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
June 1 Balance ✔ 22 5 7 6 00
11 J26 4 3 2 00 22 1 4 4 00
25 J26 2 7 0 00 21 8 7 4 00
30 S9 28 1 8 8 00 50 0 6 2 00

Sales Tax Payable

ACCOUNT ________________________________________________________________ 231
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
June 1 Balance ✔ 4 5 1 5 00
11 J26 3 2 00 4 4 8 3 00
25 J26 2 0 00 4 4 6 3 00
30 S9 2 0 8 8 00 6 5 5 1 00

Sales
ACCOUNT ________________________________________________________________ 401
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
June 30 S9 26 1 0 0 00 26 1 0 0 00

Sales Returns and Allowances

ACCOUNT ________________________________________________________________ 451
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
June 11 J26 4 0 0 00 4 0 0 00
25 J26 2 5 0 00 6 5 0 00

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PROBLEM 7.2B (continued)

Super Furniture Mart

Income Statement (Partial)
June 30, 2010

Revenue
Sales 26 1 0 0 00
Less Sales Returns and Allowances 6 5 0 00
Net Sales 25 4 5 0 00

Analyze: Total net sales for April and May were $56,437.50 (Sales tax $4,515  Rate 0.08  $56,437.50).

PROBLEM 7.3B
SALES JOURNAL 6
PAGE __________

SALES POST. ACCOUNTS SALES TAX SALES

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE PAYABLE CREDIT
NO. DEBIT CREDIT

1 2010 1

2 Feb. 3 201 Ronald Brown ✔ 5 4 00 4 00 5 0 00 2

3 4 202 Ken Hamlett ✔ 2 1 6 00 1 6 00 2 0 0 00 3

4 5 203 Vickie Neal ✔ 3 2 4 00 2 4 00 3 0 0 00 4

5 8 204 Amy Peloza ✔ 4 3 2 00 3 2 00 4 0 0 00 5

6 9 205 Luther Evans ✔ 4 3 2 00 3 2 00 4 0 0 00 6

7 10 206 Gordon Edwards ✔ 1 6 2 00 1 2 00 1 5 0 00 7

8 14 207 Ronald Brown ✔ 2 1 6 00 1 6 00 2 0 0 00 8

9 15 208 Kerry Goree ✔ 3 2 4 00 2 4 00 3 0 0 00 9

10 20 209 Ned Jones ✔ 1 0 8 00 8 00 1 0 0 00 10

11 22 210 Susan Anderson ✔ 5 4 0 00 4 0 00 5 0 0 00 11

12 28 211 Melissa Thomas ✔ 6 4 8 00 4 8 00 6 0 0 00 12

13 28 Totals 3 4 5 6 00 2 5 6 00 3 2 0 0 00 13

14 ( 1 1 1 )00 ( 2 3 1 )00 ( 4 0 1 )0 14

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PROBLEM 7.3B (continued)

GENERAL JOURNAL 16
PAGE __________

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

1 2010 1

2 Feb. 9 Sales Returns and Allowances 451 5 0 00 2

3 Sales Tax Payable 231 4 00 3

111
4 Accounts Receivable/Vickie Neal ✔ 5 4 00 4

5 Accepted return of incomplete gift pack, 5

6 Credit Memo 101; original sale made on 6

7 Sales Slip 203, February 5 7

8 8

9 13 Sales Returns and Allowances 451 5 0 00 9

10 Sales Tax Payable 231 4 00 10

111
11 Accounts Receivable/Amy Peloza ✔ 5 4 00 11

12 Accepted return of broken glass, 12

13 Credit Memo 102; original sale made on Sales 13

14 Slip 204, February 8 14

15 15

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 9 J16 5 4 00 5 4 00
13 J16 5 4 00 1 0 8 00
28 S6 3 4 5 6 00 3 3 4 8 00

Sales Tax Payable

ACCOUNT ________________________________________________________________ 231
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 9 J16 4 00 4 00
13 J16 4 00 8 00
28 S6 2 5 6 00 2 4 8 00

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PROBLEM 7.3B (continued)

GENERAL LEDGER
Sales
ACCOUNT ________________________________________________________________ 401
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 28 S6 3 2 0 0 00 3 2 0 0 00

Sales Returns and Allowances

ACCOUNT ________________________________________________________________ 451
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 9 J16 5 0 00 5 0 00
13 J16 5 0 00 1 0 0 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Susan Anderson
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 22 Sales Slip 210 S6 5 4 0 00 5 4 0 00

Ronald Brown
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 3 Sales Slip 201 S6 5 4 00 5 4 00
14 Sales Slip 207 S6 2 1 6 00 2 7 0 00

Gordon Edwards
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 10 Sales Slip 206 S6 1 6 2 00 1 6 2 00

Luther Evans
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 9 Sales Slip 205 S6 4 3 2 00 4 3 2 00

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PROBLEM 7.3B (continued)

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
Kerry Goree
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 15 Sales Slip 208 S6 3 2 4 00 3 2 4 00

Ken Hamlett
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 4 Sales Slip 202 S6 2 1 6 00 2 1 6 00

Ned Jones
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 20 Sales Slip 209 S6 1 0 8 00 1 0 8 00

Vicki Neal
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 5 Sales Slip 203 S6 3 2 4 00 3 2 4 00
9 Credit Memo 101 J16 5 4 00 2 7 0 00

Amy Peloza
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 8 Sales Slip 204 S6 4 3 2 00 3 2 4 00
13 Credit Memo 102 J16 5 4 00 2 7 0 00

Melissa Thomas
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 28 Sales Slip 211 S6 6 4 8 00 6 4 8 00

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PROBLEM 7.3B (continued)

Special Elegance Gift Shop

Schedule of Accounts Receivable
February 28, 2010

Susan Anderson 5 4 0 00
Ronald Brown 2 7 0 00
Gordon Edwards 1 6 2 00
Luther Evans 4 3 2 00
Kerry Goree 3 2 4 00
Ken Hamlett 2 1 6 00
Ned Jones 1 0 8 00
Vickie Neal 2 7 0 00
Amy Peloza 3 7 8 00
Melissa Thomas 6 4 8 00
Total 3 3 4 8 00

Balance of Accounts Receivable account: $3,348.00

Analyze: Nine postings were made to the general ledger.

PROBLEM 7.4B

SALES JOURNAL 5
PAGE __________

SALES POST. ACCOUNTS

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE DR./
NO. SALES CR.

1 2010 1

2 Feb. 3 2201 Thompson Funeral Home ✔ 4 0 0 00 2

3 8 2202 Meadows Nursery ✔ 8 0 0 00 3

4 9 2203 DeSoto Flower Shop ✔ 1 0 5 0 00 4

5 10 2204 Lovelace Nursery ✔ 7 0 0 00 5

6 20 2205 Lovelace Nursery ✔ 6 5 0 00 6

7 22 2206 Southwest Nursery ✔ 8 5 0 00 7

8 25 2207 Denton Flower Shop ✔ 4 5 0 00 8

9 27 2208 Thompson Funeral Home ✔ 7 5 0 00 9

10 28 Total 5 6 5 0 00 10

11 (1 1 1/ 4 01) 11

12 12

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PROBLEM 7.4B (continued)

GENERAL JOURNAL 10
PAGE __________

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

1 2010 1

2 Feb. 15 Sales Returns and Allowances 451 1 0 0 00 2

111
3 Accounts Receivable/DeSoto Flower Shop ✔ 1 0 0 00 3

4 Accepted return of damaged merchandise, 4

5 Credit Memo 105; original sale made 5

6 on Invoice 2203, February 9 6

7 7

8 28 Sales Returns and Allowances 451 7 5 00 8

111
9 Accounts Receivable/Thompson Funeral Home ✔ 7 5 00 9

10 Gave allowance for damaged merchandise, 10

11 Credit Memo 106; original sale made 11

12 on Invoice 2208, February 27 12

13 13

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 15 J10 1 0 0 00 1 0 0 00
28 J10 7 5 00 1 7 5 00
28 S5 5 6 5 0 00 5 4 7 5 00

Sales
ACCOUNT ________________________________________________________________ 401
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 28 S5 5 6 5 0 00 5 6 5 0 00

Sales Returns and Allowances

ACCOUNT ________________________________________________________________ 451
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Feb. 15 J10 1 0 0 00 1 0 0 00
28 J10 7 5 00 1 7 5 00

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PROBLEM 7.4B (continued)

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Denton Flower Shop
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 25 Invoice 2207 S5 4 5 0 00 4 5 0 00

DeSoto Flower Shop

NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 9 Invoice 2203 S5 1 0 5 0 00 1 0 5 0 00
15 Credit Memo 105 J10 1 0 0 00 9 5 0 00

Lovelace Nursery
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 10 Invoice 2204 S5 7 0 0 00 7 0 0 00
20 Invoice 2205 S5 6 5 0 00 1 3 5 0 00

Meadows Nursery
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 8 Invoice 2202 S5 8 0 0 00 8 0 0 00

Southwest Nursery
NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 22 Invoice 2206 S5 8 5 0 00 8 5 0 00

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PROBLEM 7.4B (continued)

Thompson Funeral Home

NAME____________________________________________________________________________ n/30
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Feb. 3 Invoice 2201 S5 4 0 0 00 4 0 0 00
27 Invoice 2208 S5 7 5 0 00 1 1 5 0 00
28 Credit Memo 106 J10 7 5 00 1 0 7 5 00

The Vintage Nursery

Schedule of Accounts Receivable
February 28, 2010

Denton Flower Shop 4 5 0 00

DeSoto Flower Shop 9 5 0 00
Lovelace Nursery 1 3 5 0 00
Meadows Nursery 8 0 0 00
Southwest Nursery 8 5 0 00
Thompson Funeral Home 1 0 7 5 00
Total 5 4 7 5 00

Balance of Accounts Receivable account: $5,475.00

Analyze: Damaged goods decreased net sales revenue by $175 and by 3% ($175  $5,650  .03).

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CRITICAL THINKING PROBLEM 7.1

SALES JOURNAL 9
PAGE __________

SALES POST. ACCOUNTS

DATE SLIP CUSTOMER’S NAME REF. RECEIVABLE DR./
NO. SALES CR.

1 2010 1

2 Aug. 1 1001 Carter’s Department Store ✔ 11 1 0 0 00 2

3 5 1002 Delux Bookstores ✔ 14 3 5 0 00 3

4 9 1003 Metroplex Game Center ✔ 5 2 5 0 00 4

5 14 1004 Play Therapy Toy Stores ✔ 15 3 0 0 00 5

6 22 1005 Hinton Game Store ✔ 11 0 4 0 00 6

7 26 1006 Carter’s Department Store ✔ 15 1 2 0 00 7

8 30 1007 Pemberton Toy Center ✔ 13 6 8 0 00 8

9 31 Total 85 8 4 0 00 9

10 (1 1 1/ 4 01) 10

11 11

GENERAL JOURNAL 25
PAGE __________

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

1 2010 1

2 Aug. 18 Sales Returns and Allowances 451 5 2 5 0 00 2

111
3 Accounts Receivable/Metroplex Game Center ✔ 5 2 5 0 00 3

4 Accepted return of damaged merchandise, 4

5 Credit Memo 151; original sale made on 5

6 Invoice 1003, August 9 6

7 7

GENERAL LEDGER
Accounts Receivable
ACCOUNT ________________________________________________________________ 111
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Aug. 1 Balance ✔ 78 4 1 0 00
18 J25 5 2 5 0 00 73 1 6 0 00
31 S9 85 8 4 0 00 159 0 0 0 00

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CRITICAL THINKING PROBLEM 7.1 (continued)

Sales
ACCOUNT ________________________________________________________________ 401
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Aug. 31 S9 85 8 4 0 00 85 8 4 0 00

Sales Returns and Allowances

ACCOUNT ________________________________________________________________ 451
ACCOUNT NO. ______________

POST. BALANCE
DATE DESCRIPTION DEBIT CREDIT
REF. DEBIT CREDIT

2010
Aug. 18 J25 5 2 5 0 00 5 2 5 0 00

ACCOUNTS RECEIVABLE LEDGER

Carter’s Department Store
NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Aug. 1 Balance ✔ 28 9 0 0 00
1 Invoice 1001 S9 11 1 0 0 00 40 0 0 0 00
26 Invoice 1006 S9 15 1 2 0 00 55 1 2 0 00

Delux Bookstores
NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Aug. 5 Invoice 1002 S9 14 3 5 0 00 14 3 5 0 00

Hinton Game Store

NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Aug. 22 Invoice 1005 S9 11 0 4 0 00 11 0 4 0 00

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CRITICAL THINKING PROBLEM 7.1 (continued)

Metroplex Game Center

NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Aug. 1 Balance ✔ 19 0 1 0 00
9 Invoice 1003 S9 5 2 5 0 00 24 2 6 0 00
18 Credit Memo 151 J25 5 2 5 0 00 19 0 1 0 00

Pemberton Toy Center

NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Aug. 30 Invoice 1007 S9 13 6 8 0 00 13 6 8 0 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Play Therapy Toy Stores
NAME____________________________________________________________________________ n/45
TERMS ______________

DATE DESCRIPTION POST. DEBIT CREDIT BALANCE

REF.

2010
Aug. 1 Balance ✔ 30 5 0 0 00
14 Invoice 1004 S9 15 3 0 0 00 45 8 0 0 00

The Toy Shop

Income Statement (Partial)
Month Ended August 31, 2010

Revenue
Sales 85 8 4 0 00
Less Sales Returns and Allowances 5 2 5 0 00
Net Sales 80 5 9 0 00

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CRITICAL THINKING PROBLEM 7.1 (continued)

The Toy Shop

Schedule of Accounts Receivable
August 31, 2010

Carter’s Department Stores 55 1 2 0 00

Delux Bookstores 14 3 5 0 00
Hinton Game Store 11 0 4 0 00
Metroplex Game Center 19 0 1 0 00
Pemberton Toy Center 13 6 8 0 00
Play Therapy Toy Stores 45 8 0 0 00
Total 159 0 0 0 00

Balance of Accounts Receivable account: $159,000.00

Analyze: The effect would be an increase in net sales.

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CRITICAL THINKING PROBLEM 7.2

1. An electronic system would prevent this mistake because the computer would automatically post and update the
customer’s subsidiary ledger account. This mistake would not be identified in a manual system until the
Accounts Receivable general ledger account was reconciled to the schedule of accounts receivable.

2. The use of an electronic scanner should reduce unrecorded sales. Each item has to be passed over the scanner,
which automatically records the price. This process reduces the chance that an item is overlooked; but with
either system, it is possible for the salesclerk to deliberately not charge a customer for a purchase. The owner
and supervisors must be alert to this possibility and need to check the salesclerk’s work on a regular basis
Discrepancies in the inventory may identify extensive abuses of this nature.

3. The computer can be programmed to alert the salesclerk by means of a code number or flashing sign on the
register/terminal display screen that a particular credit card number has been reported stolen. The register/
terminal will halt processing the transaction or instruct the salesclerk to check with a supervisor before
proceeding with the transaction. With a manual system, the salesclerk would have to consult a separate list of
stolen numbers before processing a credit card transaction. Provided the stolen credit card numbers are entered
promptly in the computer files, the electronic system would prevent charging a sale on a stolen credit card.

4. An electronic scanner would prevent customers from being charged an incorrect price. Because the computer
would be programmed with the sale prices, the scanner would automatically record the correct price. A manual
system depends on the salesclerk’s memory of price changes or requires new price tags to be placed on sale
items. An electronic system would be more dependable and efficient in this situation.

Business Connections
Managerial Focus:
1. Measures damaged or poor quality goods or late deliveries.
2. Advantages: minimized risk of receivable losses; reduced staffing costs. Disadvantages: discount fees;
loss of sales if customers do not have credit cards.
3. Credit policies, customer account documentation.
4. The actual filing of a tax return is procedural, but expert advice is needed to comply with tax laws and
minimize taxes.
5. Increase sales volume.
6. Losses from uncollectible accounts.
7. Accurate and complete records.
8. Aid in extending credit, identify slow-paying customers.

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Ethical Dilemma:
Watch when a customer pays a bill to see if Margarita puts the money in the cash register or just puts it in her
pocket and writes a credit memo to remove it from the Accounts Receivable Ledger.

Streetwise:
1. Net sales increased by 11.4% from 2005 to 2006, which was primarily driven by sales from new stores. Retail
comparable store sales decreased 2.8% for fiscal 2006 compared to an increase of 3.1% for fiscal 2005. The
decrease in retail comparable store sales for fiscal 2006 was due to the significant slowdown in the U.S. retail
home improvement market as well as difficult year-over-year comparisons due to sales arising from hurricane
activity in fiscal 2005.
2. Net receivables increased by 34.5% from 2005 to 2006. Net receivables increased at a faster rate than
sales.

Financial Statement Analysis:

1. Feb. 1 through Jan. 31.
2. Sales Returns and Allowances.
3. 22.6% ($348,650  $284,310)  $284,310  22.6 %.

Analyze Online: Answers will vary depending on the year.

Extending the Thought:

Benefits:
• no overhead costs for store locations and costs of operations in these locations
• lower labor costs
• lower merchandising and inventory maintenance costs at physical locations
• ability to offer products at a discounted price due to lower operational costs

Drawbacks:
• difficult to display and merchandise products online
• down computer systems and problems with Internet connections will cause losses of sales and create
frustration for online customers

Business Communication:
Students’ memos will vary. The memo is an important method of communication for relaying everything from
routine news to small reports. Before students begin this activity, explain that a good memo is clear, accurate,
comprehensive, concise, and professional.

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Team Work:
Sales associate would not record a transaction. Louisa’s A/P clerk would process a purchase order for $50,000
and record a debit to purchases and a credit to A/P. The A/R clerk would create a sales invoice and record a debit
to A/R and credit to Sales.

Internet Connection:
Auto creation of P.O. from Sales Order, create A/P and A/R Credit memos, quick conversion to other programs,
invoice customers, track payments and sales taxes, print checks and create purchase orders from estimates.

Chapter 7 Practice Test Answer Key

Part A True-False Part B Matching Part C Exercises
1. F 11. F 1. a 1. The balance was carried over from December 2009.
2. T 12. T 2. e 2. By referring to a copy of Sales Slip 101.
3. T 13. T 3. c 3. It was most likely a sales return or allowance. Refer
4. T 14. T 4. g to the January 17 entry on page 1 of the general
journal.
5. T 15. F 5. f
6. T 16. T 6. d
7. T 17. F 7. b
8. F 18. T
9. F 19. F
10. F 20. T

216 ■ Chapter 7 Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.