River Company’s chart of accounts includes the following selected accounts.

101 Cash 401 Sales Revenue

112 Accounts Receivable 414 Sales Discounts
120 Inventory 505 Cost of Goods Sold
301 Owner’s Capital
On April 1 the accounts receivable ledger of River Company showed the following balances:
Summer $1,550, Glav $1,200, Sheppard Co. $2,900, and Book $1,800. The April transactions
involving the receipt of cash were as follows.
Apr. 1 The owner, T. River, invested additional cash in the business $7,200.
4 Received check for payment of account from Book less 2% cash discount.
5 Received check for $920 in payment of invoice no. 307 from Sheppard Co.
8 Made cash sales of merchandise totaling $7,245. The cost of the merchandise sold was
$4,347.
10 Received check for $600 in payment of invoice no. 309 from Summer.
11 Received cash refund from a supplier for damaged merchandise $740.
23 Received check for $1,500 in payment of invoice no. 310 from Sheppard Co.
29 Received check for payment of account from Glav.
Instructions
(a) Journalize the transactions above in a six-column cash receipts journal with columns for
Cash Dr., Sales Discounts Dr., Accounts Receivable Cr., Sales Revenue Cr., Other Accounts
Cr., and Cost of Goods Sold Dr./Inventory Cr. Foot and cross foot the journal.
(b) Insert the beginning balances in the Accounts Receivable control and subsidiary accounts,
and post the April transactions to these accounts.
(c) Prove the agreement of the control account and subsidiary account balances.

Solution
Cash receipts journal
(a)
Date Accounts Ref Cash Sales Cost of Account Sales Others Inventory
Credited Dr discount goods Receivables Revenue accounts Cr
Dr sold Cr Cr Cr
Dr
April Owner’s 301 $7,200 $7,200
1 capital
April Book 101 1764 36 1800
4 112
Apr.5 Sheppard co 101 920 920
112
Apr.8 101 7,245 4347 7245 4347

Apr Summer 101 600 600

10 112
Apr Merchandiz 740 740
11 e inventory
Apr Sheppard co 101 1500 1500
23 112
Apr Glav 101 12,00 1200
24 112
(b) Insert the beginning balances in the Accounts Receivable control and subsidiary accounts,
and post the April transactions to these accounts.

Accounts Receivable
Date Explanation Ref Dr Cr Balance
Apr 1 Balance 7450 7450
Apr Balance 6,020 1430
30

Subsidiary accounts
Summer
Date Explanation Ref Dr Cr Balance
Apr 1 Balance 112 1550 1550
Apr 10 600 950

Glav
Date Explanation Ref Dr Cr Balance
Apr 1 Balance 112 1200 1200
Apr 24 Balance 1200 0

Sheppard Co.
Date Explanation Ref Dr Cr Balance
Apr 1 Balance 1200 2900 2900
Apr 5 Balance 920 1980
Apr 23 1500 480

Book
Date Explanation Ref Dr Cr Balance
Apr 1 Balance 112 1800 1800
Apr 4 Balance 1800 0
(c) Prove the agreement of the control account and subsidiary account balances.

Control account Balance Subsidiary Balance

accounts

Total account 1430 Summer 950

receivable
Sheppard co 480
Total 1430 total 1430
P7-2A Saffron Company’s chart of accounts includes the following selected accounts.
101 Cash 201 Accounts Payable
120 Inventory 306 Owner’s Drawings
130 Prepaid Insurance 505 Cost of Goods Sold

On October 1, the accounts payable ledger of Saffron Company showed the following balances:
Glass Company $2,700, Ron Co. $2,500, Hendricks Co. $1,800, and Christina Company $3,700.
The October transactions involving the payment of cash were as follows.
Oct. 1 Purchased merchandise, check no. 63, $300.
3 Purchased equipment, check no. 64, $800.
5 Paid Glass Company balance due of $2,700, less 2% discount, check no. 65, $2,646.
10 Purchased merchandise, check no. 66, $2,250.
15 Paid Hendricks Co. balance due of $1,800, check no. 67.
16 C. Saffron, the owner, pays his personal insurance premium of $400, check no. 68.
19 Paid Ron Co. in full for invoice no. 610, $1,600 less 2% cash discount, check no. 69,
$1,568.
29 Paid Christina Company in full for invoice no. 264, $2,500, check no. 70.
Instructions
(a) Journalize the transactions above in a four-column cash payments journal with columns for
Other Accounts Dr., Accounts Payable Dr., Inventory Cr., and Cash Cr. Foot and cross foot
the journal.
(b) Insert the beginning balances in the Accounts Payable control and subsidiary accounts, and
post the October transactions to these accounts.
(c) Prove the agreement of the control account and the subsidiary account balances.

Solution
(a)
Date Accounts Ref Accounts Others Inventory Cash
Payable Account Cr Cr
Dr Dr
Oct 1 Purchase 300 300
Merchandize
Oct 3 Purchase 800 800
equipment
Oct 5 Glass company 2700 54 2646
Oct.1 Purchase 2,250 2,250
0 merchandize
Oct Hendricks co 1800 1800
15
Oct Insurance 400 400
16
Oct Ron co 1600 32 1568
19
Oct Christina 2500 2500
29 Company

(b) Insert the beginning balances in the Accounts Payable control and
subsidiary accounts, and post the October transactions to these accounts.
Accounts Payable
Date Explanatio Ref Dr Cr Balance
n
Oct 1 Balance 10700 10700
Oct 31 Balance 8,600 2,100

Subsidiary Accounts
Glass Company
Date Explanation Ref Dr Cr Balance
Oct 1 Balance 2700
Oct 5 cash 2700 0

Ron Co.
Date Explanation Ref Dr Cr Balance
Oct 1 Balance 2500
Oct 19 Cash 1600 900

Hendricks Co.
Date Explanation Ref Dr Cr Balance
Oct 1 Balance 1800
Oct 15 Cash 1800 0

Christina Company
Date Explanation Ref Dr Cr Balance
 Oct 1 Balance 3700
Oct 29 Cash 2500 1200

(c) Prove the agreement of the control account and the subsidiary account balances.
Control account Balance Subsidiary Balance
accounts

Total account 2100 900

payables Ron Co.

Christina 1200
Company

Total 2100 total 2100

P7-3A The chart of accounts of IT Company includes the following selected accounts.
112 Accounts Receivable 401 Sales Revenue
120 Inventory 412 Sales Returns and Allowances
126 Supplies 505 Cost of Goods Sold
157 Equipment 610 Advertising Expense
201 Accounts Payable
In July, the following selected transactions were completed. All purchases and sales were on
account. The cost of all merchandise sold was 70% of the sales price.
July 1 Purchased merchandise from Roy Company $8,000.
2 Received freight bill from Moss Shipping on Roy purchase $400.
3 Made sales to Jen Company $1,300, and to O’Dowd Bros. $1,500.
5 Purchased merchandise from Moon Company $3,200.
8 Received credit on merchandise returned to Moon Company $300.
13 Purchased store supplies from Cress Supply $720.
15 Purchased merchandise from Roy Company $3,600 and from Anton Company
$3,300.
16 Made sales to Sager Company $3,450 and to O’Dowd Bros. $1,570.
18 Received bill for advertising from Lynda Advertisements $600.
21 Sales were made to Jen Company $310 and to Haddad Company $2,800.
22 Granted allowance to Jen Company for merchandise damaged in shipment $40.
24 Purchased merchandise from Moon Company $3,000.
26 Purchased equipment from Cress Supply $900.
28 Received freight bill from Moss Shipping on Moon purchase of July 24, $380.
30 Sales were made to Sager Company $5,600.
Instructions
(a) Journalize the transactions above in a purchases journal, a sales journal, and a general journal.
The purchases journal should have the following column headings: Date, Account Credited
(Debited), Ref., Accounts Payable Cr., Inventory Dr., and Other Accounts Dr.
(b) Post to both the general and subsidiary ledger accounts. (Assume that all accounts have zero
beginning balances.)
(c) Prove the agreement of the control and subsidiary accounts

Solution:
purchases journal
Date Accounts credited Ref Others Merchandize Accounts
account inventory payable
Dr Dr Cr
July 1 Roy Company 8,000 8,000
July 2 Moss shipping 400 400
July 5 Moon company 3200 3200
July 13 Cress supply 720 720
July 15 Roy company 3600 3600
July 15 Anton company 3300 3300
July 18 Lynda 600 600
Advertisements
July 24 Moon company 900 900
July 26 Cress supply 3000 3000
July 28 Moss shipping 380 380

sales journal

Date Accounts Ref Account Cost of Sales Merchandizing

Dr receivables goods Cr Inventory
Dr sold Dr
Dr
July 3 Jen company 1300 1300
O’Dowd Bros. 1500 1500
July Sager 3450 3450
16 Company
O’Dowd Bros. 1570 1570
July Jen Company 310 310
21 Haddad 2800 2800
Company
July Sager 5600 5600
30 Company

General entries
Date Explanation Ref Dr Cr

July 8 Accounts payable 300

Merchandize inventory 300
(merchandize returned to moon
company)
July 22 Sales returns & allowances 40
Account receivables 40
(granted allowances Jen company)

(b) Post to both the general and subsidiary ledger accounts. (Assume that all
accounts have zero beginning balances.).

Account receivables
Date explanation Ref Dr Cr Balance
July 3 Jen 1300 1300
company
July 3 O’Dowd 1500 2800
Bros.
July 16 Sager 3450 6,250
Company
July 16 O’Dowd 1570 7,820
Bros.
July 21 Jen 310 8,130
Company
July 21 Haddad 2800 10,930
Company
July 22 Jen 40 10,890
company
July 30 Sager 5,600 16,490
Company
Merchandizing inventory:
Date Explanation Ref Dr Cr Balance
July 1 Roy 8,000 8,000
Company
July 2 Moss 400 8,400
shipping
July 5 Moon 3200 11,600
company
July 8 Moon 300 11,300
company
July 15 Roy 3600 14,900
company
July 15 Anton 3300 18,200
company
July 24 Moon 900 19,100
company
July 28 Moss 380 19,480
shipping

Accounts payable
Date Explanation Ref Dr Cr Balance
July 1 Roy Company 8,000 8,000
July 2 Moss shipping 400 8,400
July 5 Moon 3200 11,600
company
July 8 Moon 300 11,300
company
July 13 Cress supply 720 12,020
July 15 Roy company 3600 15,620
July 15 Anton 3300 18,920
company
July 18 Lynda 600 19,520
 Advertisements
July 24 Moon 900 20,420
company
July 26 Cress supply 3000 23,420
July 28 Moss shipping 380 23,800

Supply
Date Explanation Ref Dr Cr Balance
July 33 Cress supply 720 720

Equipment
Date Explanation Ref Dr Cr Balance
July 26 Cress equipment 3000 3000