Problem

Assume that Madison Company in Problem 7-5B uses the periodic inventory system. Req...

Assume that Madison Company in Problem 7-5B uses the periodic inventory system.

Required

1. Open the following general ledger accounts: Cash; Accounts Receivable; Inventory (November 1 beg.

bal. is $300,000); Office Supplies; Store Supplies; Office Equipment; Accounts Payable; Long-Term

Notes Payable; O. Madison, Capital (Nov. 1 beg. bal. is $300,000); Sales; Sales Discounts; Purchases;

Purchases Returns and Allowances; Purchases Discounts; and Sales Salaries Expense. Open the following

accounts receivable subsidiary ledger accounts: Carlos Mantel, Tonya Will, and Cyd Ryan.

Open the following accounts payable subsidiary ledger accounts: Gorton Company, BLR Industries,

Baxter Supply, and Ling Company.

2. Enter the transactions from Problem 7-5B in a sales journal like that in Exhibit 7A.1, a purchases

journal like that in Exhibit 7A.3, a cash receipts journal like that in Exhibit 7A.2, a cash disbursements

journal like that in Exhibit 7A.4, or a general journal. Number journal pages as page 2.

3. Prepare a trial balance of the general ledger and prove the accuracy of the subsidiary ledgers by

preparing schedules of both accounts receivable and accounts payable.

refer 7-5B

Madison Company completes these transactions during November of the current year (terms for all its

credit sales are 2/10, n/30).

Nov. 1 Purchased $1,353 of office equipment on credit from Baxter Supply, invoice dated November 1,

terms n/10 EOM.

2 Borrowed $72,000 cash from Wisconsin Bank by signing a long-term note payable.

4 Purchased $45,100 of merchandise from BLR Industries, invoice dated November 3, terms

2/15, n/30.

5 Purchased $21,874 of store supplies on credit from Gorton Company, invoice dated November 5,

terms n/10 EOM.

8 Sold merchandise on credit to Cyd Ryan, Invoice No. 439, for $16,500 (cost is $8,340).

10 Sold merchandise on credit to Carlos Mantel, Invoice No. 440, for $9,900 (cost is $4,960).

11 Purchased $33,509 of merchandise from Ling Company, invoice dated November 10, terms 2/10, n/30.

12 Sent BLR Industries Check No. 633 in payment of its November 3 invoice less the discount.

15 Issued Check No. 634, payable to Payroll, in payment of sales salaries expense for the first

half of the month, $13,900. Cashed the check and paid the employees.

15 Cash sales for the first half of the month are $174,537 (cost is $144,866). (Cash sales are

recorded daily but are recorded only twice in this problem to reduce repetitive entries.)

15 Sold merchandise on credit to Tonya Will, Invoice No. 441, for $4,900 (cost is $2,480).

16 Purchased $1,873 of office supplies on credit from Gorton Company, invoice dated November 16,

terms n/10 EOM.

17 Received a $2,659 credit memorandum from Ling Company for the return of unsatisfactory

merchandise purchased on November 11.

18 Received payment from Cyd Ryan for the November 8 sale less the discount.

19 Received payment from Carlos Mantel for the November 10 sale less the discount.

19 Issued Check No. 635 to Ling Company in payment of its invoice of November 10 less the

return and the discount.

22 Sold merchandise on credit to Carlos Mantel, Invoice No. 442, for $14,800 (cost is $6,540).

24 Sold merchandise on credit to Tonya Will, Invoice No. 443, for $5,600 (cost is $2,420).

25 Received payment from Tonya Will for the sale of November 15 less the discount.

26 Received a $256 credit memorandum from Baxter Supply for the return of office equipment

purchased on November 1.

30 Issued Check No. 636, payable to Payroll, in payment of sales salaries expense for the last

half of the month, $13,900. Cashed the check and paid the employees.

30 Cash sales for the last half of the month are $185,009 (cost is $111,398).

30 Verify that amounts impacting customer and creditor accounts were posted and that any amounts

that should have been posted as individual amounts to the general ledger accounts were posted.

Foot and crossfoot the journals and make the month-end postings.

Required

1. Open the following general ledger accounts: Cash; Accounts Receivable; Inventory (November 1 beg.

bal. is $300,000); Office Supplies; Store Supplies; Office Equipment; Accounts Payable; Long-Term

Notes Payable; O. Madison, Capital (Nov. 1 beg. bal. is $300,000); Sales; Sales Discounts; Cost of

Goods Sold; and Sales Salaries Expense. Open the following accounts receivable subsidiary ledger accounts:

Carlos Mantel, Tonya Will, and Cyd Ryan. Open the following accounts payable subsidiary

ledger accounts: Gorton Company, BLR Industries, Baxter Supply, and Ling Company.

2. Enter these transactions in a sales journal like that in Exhibit 7.5, a purchases journal like that in

Exhibit 7.9, a cash receipts journal like that in Exhibit 7.7, a cash disbursements journal like that in

Exhibit 7.11, or a general journal. Number all journal pages as page 2.

3. Prepare a trial balance of the general ledger and prove the accuracy of the subsidiary ledgers by

preparing schedules of both accounts receivable and accounts payable.

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