College Accounting Study Set 7

Business

Quiz 7 :

Accounting for Sales and Accounts Receivable, and Cash Receipts

Quiz 7 :

Accounting for Sales and Accounts Receivable, and Cash Receipts

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Posting transactions to the general ledger and accounts receivable ledger. INSTRUCTIONS 1. Open the general ledger accounts and accounts receivable ledger accounts indicated below. 2. Post the entries from the general journal in Problem 7.2A to the appropriate accounts in the general ledger and in the accounts receivable ledger. 3. Prepare a schedule of accounts receivable. Compare the balance of the Accounts Receivable control account with the total of the schedule. GENERAL LEDGER ACCOUNTS img ACCOUNTS RECEIVABLE LEDGER ACCOUNTS img Analyze: What is the amount of sales tax owed at September 30, 2013?
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Recording sale made on account with a sales discount:
A sale made on account would debit the account receivable as there is an increase in the asset with a corresponding credit to the sale account since revenue is credited.
1.
Open cash account, sales account, accounts receivable account, sales return and allowance account, sales tax payable in general ledger
The following is the general ledger of cash:
img The following is the ledger of accounts receivable:
img The following is the general ledger of sales tax payable:
img The following is the general ledger of sales:
img The following is the general ledger of sales returns and allowances:
img The following is the ledger of Mr. C in subsidiary ledger:
img The following is the ledger of Mr. B in subsidiary ledger:
img The following is the ledger of Mr. M in subsidiary ledger:
img The following is the ledger of Mr. J in subsidiary ledger:
img The following is the ledger of Mr. C in subsidiary ledger:
img 2.
Post the journal entries in the respective ledger accounts
The following is the general ledger of cash:
img The following is the ledger of accounts receivable:
img The following is the general ledger of sales tax payable:
img The following is the general ledger of sales:
img The following is the general ledger of sales returns and allowances:
img The following is the general ledger of Mr. C:
img The following is the general ledger of Mr. B:
img The following is the general ledger of Mr. M:
img The following is the general ledger of Mr. J:
img The following is the general ledger of Mr. C:
img The following is the schedule of the accounts receivable as on October 1, 2013:
img The balance in accounts receivable account should tally with balance in schedule of accounts receivable.
Balance in accounts receivable account is $3,626.50
Balance in schedule of account receivable is $3,626.50
Analysis: The total amount of sales tax owed was $1,758.40.

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Recording sales made for cash and on account. Hartoto Corporation operates in a state with no sales tax. Record the following transactions in a general journal: img
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Normal balances:
All the assets, expenses have a debit balance whereas all the liabilities as well as the revenue accounts have a credit balance.
Make the journal entries:
• On June 5, sales made to M/s. M for $1200. Here, sales made on credit. Hence, Accounts receivable is debited and a credit balance account sale is credited.
• On June 15, Cash sales made for $ 1,840. Here, cash received. Hence, cash account is debited and a credit balance account sale is credited.
• On June 30, Cash received from M/s. M. Here, cash received for clearance of credit sale made on June 5. Hence, cash account is debited and account receivable is credited.
img

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Recording sales and cash receipts for a retail store. Amanda's Appliances began operations March 1, 2013. The firm sells its merchandise for cash and on open account. Sales are subject to a 6 percent sales tax. During March, Amanda's Appliances engaged in the following transactions: img INSTRUCTIONS 1. Open the general ledger accounts indicated below. 2. Record the transactions in a general journal. Use 1 as the journal page number. 3. Post the entries from the general journal to the appropriate general ledger accounts. GENERAL LEDGER ACCOUNTS img Analyze: What were the total cash receipts during March?
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Answer:

Answer:

Recording sale made on account with a sales discount:
A sale made on account would debit the account receivable as there is an increase in the asset with a corresponding credit to the sale account since revenue is credited.
1.
Open the general ledger accounts
The following is the general ledger of cash:
img The following is the ledger of accounts receivable:
img The following is the general ledger of sales tax payable:
img The following is the general ledger of sales:
img 2.
The following entries would be passed in general journal: Page 1
img Sales tax amount is tax on sales; it is collected from the customer and should be deposited with Government authorities (sales tax authority). Hence sales tax amount is not included in sales revenue and is separately accounted in sales tax payable account.
Explanations:
March 1:
Accounts receivable =
img Sales tax payable =
img March 4:
Accounts receivable =
img Sales tax payable =
img March 12:
Accounts receivable =
img Sales tax payable =
img March 15:
Accounts receivable =
img Sales tax payable =
img March 25:
Accounts receivable =
img Sales tax payable =
img March 31:
Accounts receivable =
img Sales tax payable =
img 3.
Post the above journal entries in the ledger accounts.
The following is the general ledger of cash:
img The following is the ledger of accounts receivable:
img The following is the general ledger of sales tax payable:
img The following is the general ledger of sales:
img Analysis: The total amount of cash receipts during the year were $11,409 (i.e. sum of all debits of cash ledger account)

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How do retail and wholesale businesses differ?
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Recording sales made for cash and on account, with 8 percent sales tax. The following transactions took place at Hanson's Wildlife Resort during May. Hanson's Wildlife Resort must charge 8 percent sales tax on all sales: img
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Recording sales and cash receipts for a retail store. Venus Office Supplies began operations October 1, 2013. The firm sells its merchandise for cash and on open account. Sales are subject to a 5 percent sales tax. During October, Venus Office Supplies engaged in the following transactions: img INSTRUCTIONS 1. Open the general ledger accounts indicated below. 2. Record the transactions in a general journal. Use 1 as the journal page number. 3. Post the entries from the general journal to the appropriate general ledger accounts. GENERAL LEDGER ACCOUNTS img Analyze: How much is owed for sales taxes collected at October 31?
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Recording sales, sales returns, and cash receipts for a retail store. The Appliance Discounter began operations November 1, 2013. The firm sells its merchandise for cash and on open account. Sales are subject to a 6 percent sales tax. During November, The Appliance Discounter engaged in the following transactions: img INSTRUCTIONS Record the transactions in a general journal. Use 1 as the journal page number. Analyze: What is the total amount due from Bob Huffington for the November 29 sale?
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During the past year, Cravens Company has had a substantial increase in its losses from uncollectible accounts. Assume that you are the newly hired controller of this firm and that you have been asked to find the reason for the increase. What policies and procedures would you investigate?
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Suppose you are the accountant for a small chain of clothing stores. Up to now, the firm has offered open-account credit to qualified customers but has not allowed them to use bank credit cards. The president of the chain has asked your advice about changing the firm's credit policy. What advantages might there be in eliminating the open-account credit and accepting bank credit cards instead? Do you see any disadvantages?
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How are the net sales for an accounting period determined?
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An excerpt from the Consolidated Statements of Earnings for The Home Depot, Inc., is presented below. Review the financial data and answer the following analysis questions: img The Home Depot, Inc.'s statement reports one figure for net sales. Name one account whose balance may have been deducted from the Sales account balance to determine a net sales amount.
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Why is a sales return or allowance usually recorded in a special Sales Returns and Allowances account rather than being debited to the Sales account?
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Retail Store Carlos Zayas is the owner of The Home Pantry, a housewares store that sells a wide variety of items for the kitchen, bathroom, and home. The Home Pantry offers a company credit card to its customers. The company has experienced an increase in sales since the credit card was introduced. Carlos is considering replacing his manual system of recording sales with electronic point-of-sale cash registers that are linked to a computer. Cash sales are now rung up by the salesclerks on a cash register that generates a tape listing total cash sales at the end of the day. For credit sales, salesclerks prepare handwritten sales slips that are forwarded to the accountant for manual entry into the general journal and accounts receivable ledger. The electronic register system Carlos is considering would use an optical scanner to read coded labels attached to the merchandise. As the merchandise is passed over the scanner, the code is sent to the computer. The computer is programmed to read the code and identify the item being sold, record the amount of the sale, maintain a record of total sales, update the inventory record, and keep a record of cash received. If the sale is a credit transaction, the customer's company credit card number is entered into the register. The computer updates the customer's account in the accounts receivable ledger stored in computer memory. If this system is used, many of the accounting functions are done automatically as sales are entered into the register. At the end of the day, the computer prints a complete listing of sales made, along with up-to-date balances for the general ledger and the accounts receivable ledger accounts related to sales transactions. Listed below are four situations that Carlos is eager to eliminate. Would use of an electronic point-of-sale system as described above reduce or prevent these problems? Why or why not? 1. The accountant did not post a sale to the customer's subsidiary ledger account. 2. The salesclerk did not charge a customer for an item. 3. The customer purchased merchandise using a stolen credit card. 4. The salesclerk was not aware that the item purchased was on sale and did not give the customer the sale price.
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Recording sales, sales returns, and cash receipts for a retail store. Eddie's Electronics began operations September 1, 2013. The firm sells its merchandise for cash and on open account. Sales are subject to a 7 percent sales tax. During September, Eddie's Electronics engaged in the following transactions: img img INSTRUCTIONS Record the transactions in a general journal. Use 1 as the page number. Analyze: What portion of the sales during September were for entertainment items? (Hint: Do not forget to reduce sales by any sales returns or allowances.)
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What purposes does the schedule of accounts receivable serve?
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How does the Sales Returns and Allowances account provide management with a measure of operating efficiency? What problems might be indicated by a high level of returns and allowances?
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Recording sales, sales returns, and cash receipts for a retail store Athletic X-Press Sporting Goods began operations March 1, 2013. The firm sells its merchandise for cash; on open account; to customers using bank credit cards, such as MasterCard and VISA; and, to customers using American Express. Merchandise sales are subject to an 8 percent sales tax. The bank credit cards charge a 3 percent fee. American Express charges a 4 percent fee. During March, Athletic X-Press Sporting Goods engaged in the following transactions: img img INSTRUCTIONS 1. Open the general ledger account and accounts receivable ledger accounts indicated below. 2. Record the transactions in a general journal. Use 1 as the journal page number. 3. Post the entries from the general journal to the appropriate account in the general ledger and in the accounts receivable ledger. 4. Prepare a schedule of accounts receivable. Compare the balance of the Accounts Receivable control account with the total of the schedule. GENERAL LEDGER ACCOUNTS img ACCOUNTS RECEIVABLE LEDGER ACCOUNTS img
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An excerpt from the Consolidated Statements of Earnings for The Home Depot, Inc., is presented below. Review the financial data and answer the following analysis questions: img Based on the financial statement presented above, what is The Home Depot, Inc.'s fiscal year period?
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Normal balances. Identify the normal balance of the following accounts. Use "dr" for debit or "cr" for credit. ---- Sales ---- Sales Returns and Allowances ---- Sales Discounts ---- Credit Card Expense ---- Sales Tax Payable
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An excerpt from the Consolidated Statements of Earnings for The Home Depot, Inc., is presented below. Review the financial data and answer the following analysis questions: img The data presented demonstrate a steady decrease in net sales over the three-year period. By what percentage have net sales of 2010 decreased from sales of 2008? Analyze Online: Find the most recent consolidated statements of income on The Home Depot, Inc., Web site (www.homedepot.com). Click on Investor Relations then Financial Reports then Annual Reports, then select the link for the most recent annual report.
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