Alice Peterson, the sole proprietor of Bright Ideas Light Center, established her business 10 years ago. Bright Ideas Light Center provides custom light fixtures for contractors and has recently grown into a large store that offers a wide variety of light fixtures, as well as installations. Ms. Peterson currently has 16 employees: an office manager, a warehouse manager, an accounting services professional, four electricians, five sales persons, two delivery persons and two stockroom persons.
Ms. Peterson recently hired you as a temporary accounting services professional. You will fill in while the accounting services professional is on maternity leave. Ms. Peterson has asked you to complete the books for December, 20XX. You will journalize each of the transactions that have occurred for the month. Ms. Peterson uses the following journals: sales, cash receipts, cash payments, purchases and the general journal. Additionally, you will issue checks, enter deposits and maintain the checkbook. At the end of the month, Ms. Peterson will ask you to complete a worksheet, a schedule of accounts receivable and payable and the end-of-the-month financial statements. You should also know that Ms. Peterson contracts with an outside company to generate the company’s payroll. However, you will receive a payroll summary on the 15th and the 30th.
List of Transactions
Enter each of the following transactions into the appropriate journal that follows the list of transactions. (See journals section beginning on page 39.) Make sure you do not duplicate your entries. (Note: Transactions entered into any of the specialized journals are not also entered into the general journal. Enter each transaction once only.) When making your entries, be sure to use specific account titles. You may refer to the Chart of Accounts (provided with company information at the end of this segment) to assist you. Follow the instructions carefully; they will tell you when it’s time to post and what needs to be posted. Remember, specialized journal columns only post the total at month-end.
DECEMBER 1, 20XX
Trans. 1 Cash register summary
Cash sales merchandise $1,822.41
Sales tax 91.12
Received on account Monique Gonzales 200.00
Total cash 2,113.53
Sales on account Robert Max
Invoice #14892 $326.82
Sales tax 16.34
Total sale 343.16
Enter the cash sales and the received on account into the cash receipts journal; enter each on its own line. Enter the sale on account into the sales journal. Be sure that Dr = Cr for each transaction entered. The total cash was deposited into the bank account at the close of the day. Make the appropriate adjustments to the checkbook. You will need to follow this same procedure for every cash register summary.
Trans. 2 Issued check 281 in the amount of $2,800.53 to First Steamboat Bank for the monthly mortgage payment for the business. $2,000.00 was applied to the principal, and $800.53 was applied to interest. (Be sure to list the principal separate from the interest. Use the Interest Expense account to record the interest.) An example of a compound entry can be found in Lesson 15, Step 12.
Trans. 3 Issued check 282 in the amount of $568.42 to Public Service to pay for November utilities.
Trans. 4 Issued check 283 in the amount of $5,085.00 to Electrifying Bulb Company to pay for November invoice number 1282.
DECEMBER 2, 20XX
Trans. 5 Cash register summary
Cash sales merchandise $2,942.61
Sales tax 147.13
Received on account Schmidt Contracting 1,193.93
Total cash 4,283.67
Sales on account Julie Adams
Invoice #14893 $142.50
Sales tax 7.13
Total sale 149.63
Trans. 6 Issued check 284 in the amount of $352.50 to Office Co. for office supplies invoice 282. (Remember, supplies are an asset when purchased.)
Trans. 7 Issued check 285 to Webmasters, Inc. in the amount of $350.52 for maintenance of website. This is an advertising expense.
DECEMBER 3, 20XX
Trans. 8 Cash register summary
Cash sales merchandise $2,892.31
Sales tax 144.62
Received on account 0.00
Total cash 3,036.93
Sales on account Rachel Simpson
Invoice #14894 $21.93
Sales tax 1.10
Total sale 23.03
Trans. 9 Issued check 286 to Hospital Texaco for repairs to delivery truck in the amount of $289.89, invoice 652. All expenses related to deliveries will be recorded as Delivery Expense.
Trans. 10 Purchased $2,852.00 in resale items from Light House Supply and placed them on our account. Terms 2/15, n/30. Purchase order A75587 was issued.
DECEMBER 4, 20XX
Trans. 11 Cash register summary
Cash sales merchandise $2,234.02
Sales tax 111.70
Received on account Rosebud Designers 1,000.00
Total cash 3,345.72
Sales on account Rosebud Designers
Invoice #14895 $120.00
Sales tax 6.00
Total sale 126.00
Trans. 12 Issued check 287 to the Steamboat Gazette for the amount of $128.98 for an advertisement in Sunday’s newspaper.
Trans. 13 Issued check 288 to Edison’s, a light bulb supplier for resale items purchased in November, purchase order 28999. The amount of the check was $1,971.75, which includes a 2% discount. The total invoice was $2,011.99.
DECEMBER 5, 20XX
Trans. 14 Cash register summary
Cash sales merchandise $3,082.44
Sales tax 154.12
Received on account 0.00
Total cash 3,236.56
Sales on account Ed Miller
Invoice #14896 $592.63
Sales tax 29.63
Total sale 622.26
Trans. 15 Issued check 289 to Mail Ex in the amount of $120.00 for freight on specialty bulbs delivered to the store.
Trans. 16 Issued check 290 to Hospital Texaco for gas purchased for delivery trucks in the amount of $389.95.
DECEMBER 6, 20XX
Trans. 17 Cash register summary
Cash sales merchandise $3,189.22
Sales tax 159.46
Received on account 0.00
Total cash 3,348.68
Sales on account Rosebud Designers
Invoice #14897 $576.76
Sales tax 28.84
Total sale 605.60
Sales on account Schmidt Contractors
Invoice #14898 $128.99
Sales tax 6.45
Total sale 135.44
Trans. 18 Purchased $2,150.03 in resale items on account from Starry Night; terms 1/15, n/30. Purchase order 95687 was issued.
Trans. 19 A defective lamp was returned by a customer Jan Smith. Check number 291 was issued in the amount of $152.25. This included $145.00 for the sale price, and $7.25 for the sales tax.
End-of-the-Week Procedures
Give yourself a pat on the back! You’ve already completed the first week of transactions. Now, complete the following end-of-the-week procedures:
- Total all the columns in all of the specialized journals. Enter the totals beneath the last entry in the journal. Add the debits and the credits (cross-foot), ensuring that they balance. If you find an error, take time to make a correction. (Do not post these column totals at this point. Wait until the end of the month.)
- Without posting anything to the cash account, determine its current account balance in the ledger. Add the totals from the cash receipts journal to the current account balance, and subtract the footing from the cash payments journal. Check this balance against your checkbook at the end of the week. They should match. If they do not match, you have an error. Take a few moments to find your error and make the correction.
- Alice Peterson likes to have up-to-date information on her customers’ accounts. Post all accounts receivable transactions into the subsidiary ledger. It is not necessary to post to the general ledger at this time. You will post this amount as a column total at the end of the month.
- Post all accounts payable transactions into the subsidiary ledger. It is not necessary to post to the general ledger at this time. You will post this amount as a column total at the end of the month.
- Post all of the entries entered into the other accounts columns from the cash receipts journal and the cash payments journal.
- Post any entries that may have been made to the general journal.
- Answer the following audit check questions:
a. What are Bright Ideas’ total sales for the week?
b. What are Bright Ideas’ total purchases for the week?
c. What is Robert Max’s account balance? - Check your audit check answers at the end of this book segment.
DECEMBER 8, 20XX
Trans. 20 Cash register summary
Cash sales merchandise $2,426.52
Sales tax 121.33
Received on account 0.00
Total cash 2,547.85
Sales on account Monique Gonzales
Invoice #14899 $89.99
Sales tax 4.50
Total sale 94.49
Trans. 21 Issued check 292 in the amount of $4,856.76 to First Steamboat Bank. A federal deposit was made for this payroll period. Remember that Bright Ideas separates FICA into Social Security Tax Payable and Medicare Tax Payable. An example of this transaction can be found in Lesson 15. The deposit breaks down as follows:
Social Security withholdings $993.79
Medicare withholdings 232.42
Federal income tax withholdings 2,404.34
Employer’s contribution to Social Security 993.79
Employer’s contribution to Medicare 232.42
DECEMBER 9, 20XX
Trans. 22 Cash register summary
Cash sales merchandise $3,282.49
Sales tax 164.12
Received on account $0.00
Total cash 3,446.61
Sales on account Schmidt Contracting
Invoice #14900 $1,899.04
Sales tax 94.95
Total sale 1,993.99
Trans. 23 Issued check 293 to Q-cell in the amount of $56.99 for November’s use of the cell phone.
Trans. 24 Issued check 294 to Steamboat Bell in the amount of $189.99 for November’s local phone service.
DECEMBER 10, 20XX
Trans. 25 Cash register summary
Cash sales merchandise $3,444.89
Sales tax 172.24
Received on account Monique Gonzales 280.42
Total cash 3,897.55
Sales on account Ed Miller
Invoice #14901 $42.45
Sales tax 2.12
Total sale 44.57
Trans. 26 Issued check 295 in the amount of 1,008.42 to Gecko Insurance Company for six months coverage on the delivery trucks. Premiums are a prepaid asset.
Trans. 27 Issued check 296 to First Steamboat Bank for the amount of $282.42 for the deposit of the state income tax withholdings.
DECEMBER 11, 20XX
Trans. 28 Cash register summary
Cash sales merchandise $2,392.88
Sales tax 119.64
Received on account Robert Max 499.84
Total cash 3,012.36
Sales on account Ed Miller
Invoice #14902 $82.99
Sales tax 4.15
Total sale 87.14
Trans. 29 Issued check 297 to Hospital Texaco in the amount of $254.55 for delivery truck gas.
Trans. 30 Issued check 298 to Clearly Clean’s Window Washing Service for the amount of $32.99. This is considered maintenance.
DECEMBER 12, 20XX
Trans. 31 Cash register summary
Cash sales merchandise $3,499.44
Sales tax 174.97
Received on account 0.00
Total cash 3,674.41
Sales on account Schmidt Contracting
Invoice #14903 $242.82
Sales tax 12.14
Total sale 254.96
Trans. 32 Issued check 299 to Light House Supply for resale items purchased in December, purchase order A75587. The amount of the check was $2,794.96, which includes a 2% discount. The total invoice was $2,852.00.
Trans. 33 Issued check 300 to Starry Night for resale items purchased in December, purchase order 95687. The amount of the check was $2,128.53, which includes a 1% discount. The total invoice was $2,150.03.
DECEMBER 13, 20XX
Trans. 34 Cash register summary
Cash sales merchandise $2,842.44
Sales tax 142.12
Received on account 0.00
Total cash 2,984.56
Sales on account None
Trans. 35 Purchased $3,842.00 in resale items from Light House Supply, terms 2/20, n/30. Purchase order B76584 was issued.
Trans. 36 Issued check 301 to First Steamboat Bank in the amount of $852.59 for a note on the delivery trucks. $800.00 was applied to principal and 52.59 to interest.
End-of-the-Week Procedures
Now you have made it through the second week. You have accomplished a lot! Please complete the following end-of-the-week procedures.
- Foot all the columns in all of the specialized journals. Start with the previous footing and add the current weeks entries. You will want to keep a cumulative balance versus a balance for each week. Cross foot for accuracy, and correct any errors you may have.
- Without posting anything to the cash account, determine its current account balance. Add the footing from the cash receipts journal to the current account balance, and subtract the footing from the cash payments journal. Check this balance against your checkbook. They should match. If they do not match, you have an error. Take some time to figure out your error and make the correction.
- Post all accounts receivable transactions to the subsidiary ledgers.
- Post all accounts payable transactions to the subsidiary ledgers.
- Post all of the entries entered into the other accounts columns from the cash receipts journal and the cash payments journal.
- Post any entries that may have been made to the general journal.
- Answer the following audit check questions:
a. Check number 295 issued to Gecko Insurance Company was posted to which account?
b. What was the purchase discount for Starry Night, purchase order 95687?
c. What are the total credit sales for the month thus far? - Check your audit check answersat the end of this book segment.