Question

Packard Company has the following Opening account balances in its general and subsidiary ledgers on January 1 and uses the Periodic Inventory System. All accounts have normal debit and credit balances.

 

General Ledger

Account Number	Account Title	January 1 Opening Balance
101	Cash	Kshs 33,750
112	Accounts Receivable	13,000
115	Notes Receivable	39,000
120	Merchandise Inventory	20,000
125	Office Supplies	1,000
130	Prepaid Insurance	2,000
157	Equipment	6,450
158	Accumulated Depreciation –Equipment	1,500
201	Accounts Payable	35,000
301	Ordinary Share Capital	50,000
303	Retained Earnings	28,700

 

 

             

 

Customer	January 1 Opening Balance
R. Devo	Kshs 1,500
B. Habari	7,500
S. Ingunza	4,000

                                                      

Creditor	January 1 Opening Balance
S. Koskei	Kshs    9,000
R. Michuki	15,000
D. Maneno	11,000

 

             The transactions for January 2020 were as follows:-

 

January.  3        Sell merchandise on account to B. Ratemo Kshs3,100, invoice no. 510, and J. Furaha Kshs 1,800 invoice no. 511.

                         5     Purchase merchandise on account from S. Yimbo Kshs3,000 and D. Lelei Kshs 2,700

7           Receive checks for Kshs 4,000 from S. Ingunza and Kshs 2,000 from B. Habari.

8           Pay freight on merchandise purchased Kshs 180.

9           Send checks to S. Koskei for Kshs 9,000 and D. Maneno for Kshs 11,000

10       Summary cash sales total Kshs 15,500.

11       Sell merchandise on account to R. Devo for Kshs 1,900, invoice no.

512, and to S. Ingunza Kshs 900, invoice no. 513. Post all entries to the subsidiary ledgers

12       Pay rent of Kshs 1,000 for January.

13       Receive payment in full from B. Ratemo and J. Furaha.

15       Paid dividends Kshs 800 by cash to the shareholders.

16       Purchase merchandise on account from D. Maneno for Kshs 15,000, from S. Koskei      for Kshs 13,900, and from S. Yimbo for Kshs 1,500.

17       Pay Kshs400 cash for office supplies.

18       Return Kshs 200 of merchandise to S. Koskei and receive credit.

                                         20 Summary cash sales total Kshs 17,500.

21                                   21                                     22                                     23                                   25                                           27                                     28                                   31                                   31

Issue Kshs 15,000 note to R. Michuki in payment of balance   due. Receive payment in full   from S. Ingunza Post all entries to the subsidiary ledgers  Sell merchandise on   account to B. Ratemo for Kshs 3,700, invoice no. 514, and to R. Devo for Kshs   800, invoice no. 515. Send checks to D. Maneno and S. Koskei in full payment. Sell merchandise on account to B. Habari forKshs 3,500,   invoice no. 516, and to J. Furaha for   Kshs 6,100, invoice no. 517. Purchase merchandise on account from D. Maneno for Kshs   12,500, from D. Lelei for Kshs 1,200, and from S. Yimbo for Kshs 2,800. Pay Kshs 200 cash for office supplies. Summary cash sales total Kshs 22,920. Pay sales salaries of Kshs 4,300 and office salaries of   Kshs 3,600.

 

 

 

(a)    Show the effect of each event on the Elements of the financial statements using a horizontal statements model like the following one. Use+ for increase, - for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example. 

Date	Assets   =     Liabs   +   Equity	Rev. or         Exp. or Gain        –      Loss     =   Net Inco.	Cash   Flow
Jan 3rd	+3,100 −3,100)=??+??	NA                 NA                NA	NA

 

(b)   Record the January transactions in the appropriate journal: 

i) Sales journal  ii) Purchases journal  iii) Cash receipts journal  iv) Cash payment journal  v) General journal 

(c)    Post the journals to the general and subsidiary ledgers. Add and number new accounts (chart) in an orderly fashion as needed.

(d)   Prepare a unadjusted trial balance at January 31, 2020.

(e)    Prepare adjusting journal entries and post to the general ledger using the following additional information:-

1.        Office supplies at January 31 total Kshs 700.

2.        Insurance coverage expires on October 31,2020.

3.        Annual depreciation on the equipment is Kshs 1,500.

4.        Interest of Kshs 30 has accrued on the note payable.

5.        Merchandise inventory at January 31 is Kshs 15,000.

(f)    Prepare an adjusted trial balance on January 21,2020.

(g)   Using the adjusted trial balance, prepare the following financial statements 

i) A multiple-step income statement for January. ii) Statement of changes in equity for January. iii) Statement of cash flows for January. 

iv) Classified statement of financial position at the end of January.

(h)   Prepare and post the closing journal entries.

(i)     Prepare a post-closing trial balance.

(j)     Determine (prove) whether the subsidiary ledgers agree with the control accounts in the general ledger.

(k)   Prepare reversing journal entries on February 1,2020 and post to the general ledger.