Question

The Bike and Hike Outlet is a retail store. Transactions involving purchases and cash payments for the firm during June 2019 are listed below, as are the general ledger accounts used to record these transactions.

GENERAL LEDGER ACCOUNTS

101	Cash	$	21,900	Dr.
131	Equipment		66,000	Dr.
201	Notes Payable
205	Accounts Payable		4,980	Cr.
501	Purchases
503	Purchases Ret. and Allow.
504	Purchases Discounts
611	Rent Expense
614	Salaries Expense
617	Telephone Expense

DATE				TRANSACTIONS
June	1			Issued Check 1101 for $3,400 to pay the monthly rent.
	3			Purchased merchandise for $3,100 from Perfect Fit Shoe Shop, Invoice 746, dated June 1; the terms are 2/10, n/30.
	5			Purchased new store equipment for $5,500 from Middleton Company, Invoice 9067 dated June 4, net payable in 30 days.
	7			Issued Check 1102 for $1,570 to Leisure Wear Clothing Company, a creditor, in payment of Invoice 3342 of May 9.
	8			Issued Check 1103 for $3,038 to Perfect Fit Shoe Shop, a creditor, in payment of Invoice 746 dated June 1 ($3,100), less a cash discount ($62).
	12			Purchased merchandise for $2,300 from Juandas Coat Shop, Invoice 9922, dated June 9, net due and payable in 30 days.
	15			Issued Check 1104 for $238 to pay the monthly telephone bill.
	18			Received Credit Memorandum 203 for $800 from Juandas Coat Shop for defective goods that were returned; the original purchase was made on Invoice 9922 dated June 9.
	21			Purchased new store equipment for $10,500 from Warren Company; issued a three-month promissory note with interest at 12 percent.
	23			Purchased merchandise for $6,400 from The Motor Speedway, Invoice 1927, dated June 20; terms of 2/10, n/30.
	25			Issued Check 1105 for $1,500 to Juandas Coat Shop, a creditor, in payment of Invoice 7416 dated May 28.
	28			Issued Check 1106 for $6,272 to The Motor Speedway, a creditor, in payment of Invoice 1927 of June 20 ($6,400), less a cash discount ($128).
	30			Purchased merchandise for $2,080 from Jogging Shoes Store, Invoice 4713, dated June 26; the terms are 1/10, n/30.
	30			Issued Check 1107 for $5,800 to pay the monthly salaries of the employees.

Required:

1. Open the general ledger accounts and enter the balances as of June 1, 2019.
2. Record the transactions in a purchases journal, a cash payments journal, and a general journal.
3. Post the entries from the general journal and from the Other Accounts Debit section of the cash payments journal to the proper general ledger accounts.
4. Total, prove, and rule the special journals as of June 30.
5. Post the column totals from the special journals to the general ledger.
6. Show how the firm’s net cost of purchases would be reported on its income statement for the month ended June 30.

Analyze:
What total liabilities does the company have at month-end?

Answer 1

ANSWER

As per the given question,

Purchase Journal
Date	Purchased From	Invoice No	Invoice Date	Terms	Pur Debit, AP Cr
Jun 3	Perfect Fit Shoe Shop	746	Jun 1	2/10,n/30	$                     3,100
Jun 12	Juandas Coat Shop	9922	Jun 9	30 days	$                     2,300
Jun 23	The Motor Speedway	1927	Jun 20	2/10,n/30	$                     6,400
Jun 30	Jogging Shoes Store	4713	Jun 26	1/10,n/30	$                     2,080
Total					$                   13,880
Cash Payment Journal
Date	Ck NO	Desc	AP Debit	Account Name	Amount	Pur Disc Credit	Cash Credit
Jun 1	1101	Towards Rent		Rent Expense	$                     3,400		$           3,400
Jun 7	1102	To Creditor	$              1,570				$           1,570
Jun 8	1103	To Creditor	$              3,100			$                        62	$           3,038
Jun 15	1104	Towards Telephone Expense		Telephone Expenses	$                         238		$               238
Jun 25	1105	To Creditor	$              1,500				$           1,500
Jun 28	1106	To Creditor	$              6,400			$                      128	$           6,272
Jun 30	1107	Towards Salaries		Salaries Expense	$                     5,800		$           5,800
Total			$            12,570		$                     9,438	$                      190	$         21,818
General Journal
Date	Account	Debit	Credit
Jun 5	Store Equipment	$                                                5,500
	Accounts Payable		$              5,500
Jun 18	Accounts Payable	$                                                    800
	Purchase Return and Allowance		$                  800
Jun 21	Store Equipment	$                                              10,500
	Note Payable		$            10,500
	Net Cost of Purchase
	Purchase		$            13,880
	Less:
	Return	$                                                    800
	Discount	$                                                    190	$                  990
	Net Cost of Purchase		$            12,890
Ledger Posting:
Cash
Date	Debit	Credit	Balance
Beginning	$                                                    21,900		$            21,900
Jun 30		$                                              21,818	$                    82
Accounts Payable
Date	Debit	Credit	Balance
Beginning		$                                                4,980	$              4,980
Jun 5		$                                                5,500	$            10,480
Jun 18	$                                                          800		$              9,680
Jun 30		$                                              13,880	$            23,560
Jun 30	$                                                    12,570		$            10,990
Notes Payable
Date	Debit	Credit	Balance
Jun 21		$                                              10,500	$            10,500
Equipment
Date	Debit	Credit	Balance
Beginning	$                                                    66,000		$            66,000
Jun 5	$                                                       5,500		$            71,500
Jun 21	$                                                    10,500		$            82,000
Total Liabilities:
Accounts Payable	$                                                    10,990
Note Payable	$                                                    10,500
Total Liabilities	$                                                    21,490