Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 79

Transaction analysis using T-accounts This exercise provides practice in understanding the operation of T-accounts and transaction analysis. For each situation, you must solve for a missing amount. Use a T-account for the balance sheet account, show in a horizontal model, or prepare journal entries for the information provided. In each case, there is only one debit entry and one credit entry in the account during the month.

Example:

Accounts Payable had a balance of $6,000 at the beginning of the month and $5,400 at the end of the month. During the month, payments to suppliers amounted to $16,000. Calculate the purchases on account during the month.

Solution:

a. Accounts Receivable had a balance of $5,400 at the beginning of the month and $2,200 at the end of the month. Credit sales totaled $30,000 during the month. Calculate the cash collected from customers during the month, assuming that all sales were made on account.

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b. The Supplies account had a balance of $1,460 at the beginning of the month and $1,940 at the end of the month. The cost of supplies used during the month was $6,320. Calculate the cost of supplies purchased during the month.

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c. Wages Payable had a balance of $1,520 at the beginning of the month. During the month, $6,200 of wages were paid to employees. Wages Expense accrued during the month totaled $7,800. Calculate the balance of Wages Payable at the end of the month.

Step 1 of 2

b.

Prepare the ledger account for Supplies

Account Name: Supplies Account No:
Date	Explanation	Journ Ref	Debit	Credit	Balance Debit/ (Credit)
1st	Balance				$5,840
	Cash purchases		$27,200		$33,040
	Cost of goods sold			$25,280	$7,760

Calculation of cost of supplies purchased

Closing balance of supplies	$7,760
Add: Cost of supplies used	$25,280
	$33,040
Less: Opening balance of supplies	$5,840
Cost of supplies purchased	$27,200

Prepare Journal entries

Journal entries
S. No	Date	Account title and explanation	Post. Ref	Debit	Credit
		Cost of goods sold		$25,280
		Supplies			$25,280
		(To record the use of supplies $25,280)
		Supplies		$27,200
		Cash			$27,200
		(To record the purchase of supplies costing $27,200)

The cost of supplies purchased during the month is