The comparative regional segment revenues for McDonald’s Corporation are as follows:

The comparative regional segment revenues for McDonald’s Corporation are as follows:


Year 2
(in millions)
Year 1
(in millions)
United States $ 8,112 $ 7,944
Europe 9,569 9,274
APMEA* 5,065 4,337
Other Countries & Corporate 1,328 1,190
Total revenues $24,074 $22,745
*APMEA = Asia/Pacific, Middle East, Africa



a. Provide a horizontal analysis of the regional segment revenues using Year 1 as the base year. Round whole percents to one digit.

b. Provide a vertical analysis of the regional segment revenues for both years. Round whole percents to one digit.

c. What conclusions can be drawn from your analyses?


Answer:

a. Horizontal analysis:
Year 2
(in millions)
Year 1
(in millions)
Increase/(Decrease)
Amount Percent
United States $ 8,112 $ 7,944 $ 168 2.1%
Europe 9,569 9,274 295 3.2%
APMEA 5,065 4,337 728 16.8%
Other Countries & Corporate 1,328 1,190 138 11.6%
Total revenues $24,074 $22,745 $1,329 5.8%
b. Vertical analysis:
Year 2 Year 1
Amount
(in millions) Percent
Amount
(in millions) Percent
United States $ 8,112 33.7% $ 7,944 34.9%
Europe 9,569 39.8% 9,274 40.8%
APMEA 5,065 21.0% 4,337 19.1%
Other Countries & Corporate 1,328 5.5% 1,190 5.2%
Total revenues $24,074 100.0% $22,745 100.0%


c. The United States (U.S.) segment revenues increased 2.1% from Year 1 to Year 2, while Europe, APMEA, and Other Countries & Corporate increased 3.2%, 16.8%, and 11.6%, respectively. The higher growth rate in the smaller regions is the result of growing from a smaller base of revenue. The vertical analysis indicates that the U.S. and Europe declined from 34.9% to 33.7% of total revenues, and 40.8% to 39.8% of total revenues, respectively, while APMEA increased from 19.1% to 21.0% of total revenues. The vertical analysis is consistent with the horizontal analysis, showing modest revenue increases in the U.S. and Europe and stronger increases in APMEA. The growth in APMEA is likely due to restaurant unit growth in this part of the world.

News Corporation is one of the world’s largest entertainment companies that includes Twentieth Century Fox films,

News Corporation is one of the world’s largest entertainment companies that includes Twentieth Century Fox films, Fox Broadcasting, Fox News, the FX, and various satellite, cable, and publishing properties. The company provided revenue disclosures by its major product segments in the notes to its financial statements as follows:



For a Recent Year
(in millions)
Filmed Entertainment $ 7,631
Television 4,228
Cable Network Programming 7,038
Direct Broadcast Satellite Television 3,802
Magazines and Inserts 1,192
Newspapers and Information Services 6,087
Book Publishing 1,269
Other 1,531
Total revenues $32,778





a. Provide a vertical analysis of the product segment revenues.

b. Are the revenues of News Corporation diversified or concentrated within a product segment? Explain.


Answer:

a.
 For a Recent
Year
(in millions) Percent
Filmed Entertainment $ 7,631 23.3%
Television 4,228 12.9%
Cable Network Programming 7,038 21.5%
Direct Broadcast Satellite Television 3,802 11.6%
Magazines and Inserts 1,192 3.6%
Newspapers and Information Services 6,087 18.6%
Book Publishing 1,269 3.9%
Other 1,531 4.7%
Total revenues $32,778 100.0%






b. News Corporation is very diversified. The Filmed Entertainment segment has the largest percent of revenues to total revenues at 23.3%. This is a low percent for a single segment, suggesting little concentration. In addition, four additional segments have a percent of revenues to total revenues in excess of 10% (Television, Cable Network Programming, Direct Broadcast Satellite Television, and Newspapers and Information Services). The three smallest segments total 12.2% (3.6% + 3.9% + 4.7%) of revenues to total revenues. Overall, News Corporation is a highly diversified entertainment company, deriving significant revenues from multiple sources.

Starbucks Corporation reported the following geographical segment revenues for a recent and a prior fiscal year.

Starbucks Corporation reported the following geographical segment revenues for a recent and a prior fiscal year.


Recent Year
(in millions)
Prior Year
(in millions)
United States $ 7,560 $7,061
International 2,289 1,914
Global consumer products 707 674
Total revenues $10,556 $9,649


a. Prepare a horizontal analysis of the segment data using the prior year as the base year.

b. Prepare a vertical analysis of the segment data.

c. What conclusions can be drawn from your analyses?


Answer:

a. Horizontal analysis:
Recent Year
(in millions)
Prior Year
(in millions)
Increase/(Decrease)
Amount Percent
United States $ 7,560 $7,061 $499 7.1%
International 2,289 1,914 375 19.6%
Global consumer products 707 674 33 4.9%
Total revenues $10,556 $9,649 $907 9.4%
b. Vertical analysis:
Recent Year Prior Year
Amount Percent Amount Percent
United States $ 7,560 71.6% $7,061 73.2%
International 2,289 21.7% 1,914 19.8%
Global consumer products 707 6.7% 674 7.0%
Total revenues $10,556 100.0% $9,649 100.0%



c. The horizontal analysis indicates that the total revenues of Starbucks increased by over 9% (9.4%) from the prior year to the recent year. This increase is explained by improvements in consumer confidence experienced during this time. Starbucks was positively impacted because its product is both premium priced and discretionary. Thus, as economic times improved, consumers increased consumption and/or chose more expensive options. Revenues increased by 19.6% internationally, versus 7.1% in the United States. Higher international growth may be the result of more store openings internationally, than in the United States. Global consumer products (segment that sells Starbucks-licensed products) had the lowest growth between the two years. The vertical analysis indicates that the percent of U.S. revenues to total revenues decreased from 73.2% in the prior year to 71.6% in the recent year. In this same period, the percent of international revenues to total revenues increased from 19.8% in the prior year to 21.7% in the recent year. Both analyses indicate that Starbucks’ international operations grew more than did the U.S. operations during the two-year period.

For each of the following companies, determine if their e-commerce strategy is primarily business-to-consumer (B2C)

For each of the following companies, determine if their e-commerce strategy is primarily business-to-consumer (B2C), business-to-business (B2B), or both. Use the Internet to investigate each company’s site in conducting your research.

a. Amazon.com
b. Dell Inc.
c. DuPont
d. Intuit Inc.
e. L.L. Bean, Inc.
f. W.W. Grainger, Inc.


Answer:

a.
 Amazon.com B2C. Sells books, DVDs, and other products to
individual consumers.
b.
 Dell Inc. B2C and B2B. Sells computer products to both
individuals and corporations. Its site separates
individual and corporate sales.
c.
 DuPont B2B. Specialty chemicals. DuPont Direct® is its B2B
Web application.
d.
 Intuit Inc. B2C and B2B. Arranges its site for both individuals
and businesses, since its products are divided this
way.
e.
 L.L. Bean, Inc. B2C. Consumer clothes e-retailer.
f.
 W.W. Grainger, Inc. B2B. Sells maintenance, repair, and operating
supplies to manufacturing companies.

Apple Inc.’s iTunes® provides digital products, such as music, video, and software, which can be downloaded to portable devices

Apple Inc.’s iTunes® provides digital products, such as music, video, and software, which can be downloaded to portable devices such as the iPhone® and iPod®. Purchases made on iTunes are made with credit cards that are on file with the credit card processing company. Such transactions are considered cash transactions. Once the purchases are made, consumers can download the requested digital products to their portable devices for their enjoyment and the charges will show up on their credit card bills.


a. What kind of e-commerce application is described by Apple iTunes?

b. Assume you purchased 12 songs for $1 each on iTunes. Provide the journal entry generated by Apple’s e-commerce application.

c. If a special journal were used, what type of special journal would be used to record this sales transaction?

d. If an electronic form were used, what type of electronic form would be used to record this sales transaction?

e. Would it be appropriate for Apple to use either special journals or electronic forms for sales transactions from iTunes? Explain.


Answer:
a. iTunes is an example of a B2C, or business-to-consumer e-commerce application. The B, or business, is Apple. The C, or consumers, would mostly be individuals who purchase digital products from the download store.


b.
 Cash 12
Fees Earned 12


c. The cash receipts journal is used to record debits to Cash from cash sales or collections on account.

d. The electronic invoice form can be used for either transactions on account, as
illustrated in the chapter, or for cash sales. The invoice form used for sales on
account is different from the one used for cash sales. The latter invoice form
makes a debit to Cash, rather than a debit to a customer account.

e. Sales made on B2C e-commerce transactions are computerized transactions, so a special journal is inappropriate. On an e-commerce site, the consumer inputs the transaction information on the Web page; thus, there is no need for a separate electronic form for re-entering the same information to record the sale. Essentially, the e-commerce application is the form that originates the sales transaction inside the accounting system. Accounting transactions flow directly from the shopping cart information directly into the accounting system.

Most computerized accounting systems use electronic forms to record transaction information,

Most computerized accounting systems use electronic forms to record transaction information, such as the invoice form illustrated at the top of Exhibit 7 in this chapter.

a. Identify the key input fields (spaces) in an electronic invoice form.
b. What accounts are posted from an electronic invoice form?
c. Why aren’t special journal totals posted to control accounts at the end of the month in an electronic accounting system?


Answer:



















a. In the electronic invoice form from QuickBooks® shown above, typical fields for data input can be identified as follows:

1. Customer name and address
2. Date and invoice number
3. Description of item sold
4. Amount of revenue


b. The customer Accounts Receivable is debited, and Fees Earned is credited. A computerized accounting system does not require posting to a separate accounts receivable control account. In this case, the total accounts receivable reported on the balance sheet is merely the sum of the balances of the individual customer account balances. That is, the accounts receivable account summarizes the customer accounts automatically.


c. Controlling accounts are not posted at the end of the month in a computerized accounting system. In addition, special journals are not normally used to accumulate transactions. Transactions are recorded through data input into electronic forms (or for infrequent transactions, by an electronic general journal). Balances of affected accounts are automatically posted and updated from the information recorded on the form. If desired, the computer can provide a printout of the monthly transaction history for a particular account, which provides the same information as a journal. In addition, the controlling account is not separately posted. In a manual system, separate posting to the controlling account provides additional control by reconciling the controlling account balance against the sum of the individual customer account balances. However, in a computerized accounting system, there are no separate postings to a controlling account because the computer is not going to make posting or mathematical errors. Therefore, there is no need for the additional control provided by posting a journal total to a controlling account.

The following cash receipts journal headings have been suggested for a small service firm. List the errors you find in the headings

The following cash receipts journal headings have been suggested for a small service firm. List the errors you find in the headings.


Cash Receipts Journal Page 12
Date
Account
Credited
Post.
Ref.
Fees
Earned
Cr.
Accts.
Rec.
Cr.
Cash
Cr.
Other
Accounts
Dr.


Answer:
1. The Cash column is for debits (not credits).
2. The Other Accounts column is for credits (not debits).
3. A better order of columns would be to place the Other Accounts Cr. column to the left of the Fees Earned Cr. column.

A recommended and corrected cash receipts journal is as follows:


CASH RECEIPTS JOURNAL Page 12
Date
Account
Credited
Post.
Ref.
Other
Accounts
Cr.
Fees
Earned
Cr.
Accts.
Rec.
Cr.
Cash
Dr.

Pinnacle Consulting Company makes most of its sales and purchases on credit.

Pinnacle Consulting Company makes most of its sales and purchases on credit. It uses the five journals described in this chapter (revenue, cash receipts, purchases, cash payments, and general journals). Identify the journal most likely used in recording the postings for selected transactions indicated by letter in the T accounts on the next page:


Cash Prepaid Rent
a. 10,940 b. 6,500 e. 1,200
Accounts Receivable Accounts Payable
c. 11,790 a. 10,940 b. 6,500 d. 7,400
Office Supplies Fees Earned
d. 7,400 c. 11,790
Rent Expense
e. 1,200


Answer:
Revenue journal: (c)
Cash receipts journal: (a)
Purchases journal: (d)
Cash payments journal: (b)
General journal: (e)

After Klondike Assay Services Inc. had completed all postings for March in the current year (2014)

After Klondike Assay Services Inc. had completed all postings for March in the current year (2014), the sum of the balances in the following accounts payable ledger did not agree with the $37,600 balance of the controlling account in the general ledger.




NAME C. D. Greer and Son
ADDRESS 972 S. Tenth Street
Date Item
Post.
Ref. Debit Credit Balance
2014
Mar. 17 P30 3,750 3,750
27 P31 12,000 15,750
NAME Castle Chemical Supplies Inc.
ADDRESS 1170 Mattis Avenue
Date Item
Post.
Ref. Debit Credit Balance
2014
Mar. 1 Balance  8,300
9 P30 6,000 14,000
12 J7 300 13,700
20 CP23 5,800 7,900
NAME Cutler and Powell
ADDRESS 717 Elm Street
Date Item
Post.
Ref. Debit Credit Balance
2014
Mar. 1 Balance  6,100
18 CP23 6,100 —
29 P31 7,800 7,800
NAME Hudson Bay Minerals Co.
ADDRESS 1240 W. Main Street
Date Item
Post.
Ref. Debit Credit Balance
2014
Mar. 1 Balance  4,750
10 CP22 4,750 —
17 P30 3,700 3,700
25 J7 1,000 1,700
NAME Valley Power
ADDRESS 915 E. Walnut Street
Date Item
Post.
Ref. Debit Credit Balance
2014
Mar. 5 P30 3,150 3,150

Assuming that the controlling account balance of $37,600 has been verified as correct, (a) determine the error(s) in the preceding accounts and (b) prepare a listing of accounts payable creditor balances (from the corrected accounts payable subsidiary ledger).


Answer:
a. Two errors were made in balancing the accounts in the subsidiary ledger:

(1) The Castle Chemical Supplies Inc. transaction of March 9 should have resulted in a balance of $14,300 instead of $14,000, and the account balance at March 12 should have been $14,000 instead of $13,700. The account balance at March 20 should have been $8,200 instead of $7,900.

(2) The Hudson Bay Minerals Co. transaction of March 25 should have resulted in a balance of $2,700 instead of $1,700.


b.
KLONDIKE ASSAY SERVICES INC.
Accounts Payable Creditor Balances
March 31, 2014
C. D. Greer and Son $15,750
Castle Chemical Supplies Inc. 8,200
Cutler and Powell 7,800
Hudson Bay Minerals Co. 2,700
Valley Power 3,150
Total accounts payable $37,600

Happy Tails Inc. has a June 1 accounts payable balance of $600, which consists of $360 due Labradore Inc. and $240 due Meow Mart Inc

Happy Tails Inc. has a June 1 accounts payable balance of $600, which consists of $360 due Labradore Inc. and $240 due Meow Mart Inc. Transactions related to purchases and cash payments completed by Happy Tails Inc. during the month of June 2014 are as follows:

June 4. Purchased pet supplies from Best Friend Supplies Inc. on account, $255.
6. Issued Check No. 345 to Labradore Inc. in payment of account, $360.
13. Purchased pet supplies from Poodle Pals Inc., $710.
18. Issued Check No. 346 to Meow Mart Inc. in payment of account, $240.
19. Purchased office equipment from Office Helper Inc. on account, $2,670.
23. Issued Check No. 347 to Best Friend Supplies Inc. in payment of account from purchase made on June 4.
27. Purchased pet supplies from Meow Mart Inc. on account, $400.
30. Issued Check No. 348 to Jennings Inc. for cleaning expenses, $65.


a. Prepare a purchases journal and a cash payments journal to record these transactions. The forms of the journals are similar to those used in the text. Place a check mark () in the Post. Ref. column to indicate when the accounts payable subsidiary ledger should be posted. Happy Tails Inc. uses the following accounts:

Cash 11
Pet Supplies 14
Office Equipment 18
Accounts Payable 21
Cleaning Expense 54

b. Prepare a listing of accounts payable creditor balances on June 30, 2014. Verify that the total of the accounts payable creditor balances equals the balance of the accounts payable controlling account on June 30, 2014.

c. Why does Happy Tails Inc. use a subsidiary ledger for accounts payable?


Answer:

a.
PURCHASES JOURNAL Page 16
Date Account Credited
Post.
Ref.
Accounts
Payable
Cr.
Pet
Supplies
Dr.
Other
Accounts
Dr.
Post.
Ref. Amount
2014
June 4 Best Friend Supplies Inc. √ 255 255
13 Poodle Pals Inc. √ 710 710
19 Office Helper Inc. √ 2,670 Office Equipment 18 2,670
27 Meow Mart Inc. √ 400 400
30 4,035 1,365 2,670
(21) (14)
CASH PAYMENTS JOURNAL Page 22
Date
Ck.
No. Account Debited
Post.
Ref.
Other
Accounts
Dr.Q
Accounts
Payable
Dr.
Cash
Cr.
2014
June 6 345 Labradore Inc. √ 360 360
18 346 Meow Mart Inc. √ 240 240
23 347 Best Friend Supplies Inc. √ 255 255
30 348 Cleaning Expense 54 65 65
30 65 855 920
(21) (11)



b.
HAPPY TAILS INC.
Accounts Payable Creditor Balances
June 30, 2014
Meow Mart Inc. $ 400
Poodle Pals Inc. 710
Office Helper Inc. 2,670
Total creditor (supplier) accounts $3,780
The total of the creditor accounts on June 30, 2014, $3,780, equals the
balance of the accounts payable controlling account, shown as follows:
Accounts Payable
June 30 855 June 1 Bal.
30
Bal.
600
4,035
3,780
q



c. Happy Tails Inc. uses a subsidiary ledger for accounts payable to track its credit purchases and payments to the individual supplier. This is needed so that it knows how much it owes to each individual supplier. Without the subsidiary ledger, it would be difqficult for it to accurately pay suppliers for the amount owed in a timely manner.

Transactions related to purchases and cash payments completed by Green Kleen Cleaning Services Inc. during the month of March 2014

Transactions related to purchases and cash payments completed by Green Kleen Cleaning Services Inc. during the month of March 2014 are as follows:

Mar. 1. Issued Check No. 57 to Liquid Klean Supplies Inc. in payment of account, $325.
3. Purchased cleaning supplies on account from Sani-Fresh Products Inc., $190.
8. Issued Check No. 58 to purchase equipment from Carson Equipment Sales, $2,850.
12. Purchased cleaning supplies on account from Porter Products Inc., $320.
15. Issued Check No. 59 to Bowman Laundry Service in payment of account, $150.
18. Purchased supplies on account from Liquid Klean Supplies Inc., $245.
20. Purchased laundry services from Bowman Laundry Service on account, $130.
26. Issued Check No. 60 to Sani-Fresh Products Inc. in payment of March 3 invoice.
31. Issued Check No. 61 in payment of salaries, $5,900.


Prepare a purchases journal and a cash payments journal to record these transactions. The forms of the journals are similar to those illustrated in the text. Place a check mark () in the Post. Ref. column to indicate when the accounts payable subsidiary ledger should be posted. Green Kleen Cleaning Services Inc. uses the following accounts:

Cash 11
Cleaning Supplies 14
Equipment 18
Accounts Payable 21
Salary Expense 51
Laundry Service Expense 53



Answer:

PURCHASES JOURNAL Page 36
Date Account Credited
Post.
Ref.
Accounts
Payable
Cr.
Cleaning
Supplies
Dr.
Other
Accounts
Dr.
Post.
Ref. Amount
2014
Mar. 3 Sani-Fresh Products Inc. √ 190 190
12 Porter Products Inc. √ 320 320
18 Liquid Klean Supplies Inc. √ 245 245
20 Bowman Laundry Service √ 130 Laundry Service Expense 53 130
31 885 755 130
(21) (14)
CASH PAYMENTS JOURNAL Page 41
Date
Ck.
No. Account Debited
Post.
Ref.
Other
Accounts
Dr.
Accounts
Payable
Dr.
Cash
Cr.
2014
Mar. 1 57 Liquid Klean Supplies Inc. √ 325 325
8 58 Equipment 18 2,850 2,850
15 59 Bowman Laundry Service √ 150 150
26 60 Sani-Fresh Products Inc. √ 190 190
31 61 Salary Expense 51 5,900 5,900
31 8,750 665 9,415

The cash payments and purchases journals for Out of Eden Landscaping Co. are shown below

The cash payments and purchases journals for Out of Eden Landscaping Co. are shown below. The accounts payable control account has an April 1, 2014, balance of $1,990, consisting of an amount owed to Augusta Sod Co.



Cash Payments Journal Page 31
Date
Ck.
No. Account Debited
Post.
Ref.
Other
Accounts
Dr.
Accounts
Payable
Dr.
Cash
Cr.
2014
Apr. 4 203 Augusta Sod Co.  1,990 1,990
 5 204 Utilities Expense 54 410 410
 15 205 Home Centers Lumber Co.  4,650 4,650
 24 206 Schott’s Fertilizer  770 770
30 410 7,410 7,820
() (21) (11)
Purchases Journal Page 22
Date Account Credited
Post.
Ref.
Accounts
Payable
Cr.
Landscaping
Supplies
Dr.
Other
Accounts
Dr.
Post.
Ref. Amount
2014
Apr. 3 Home Centers Lumber Co.  4,650 4,650
7 Concrete Equipment Co.  4,550 Equipment 18 4,550
14 Schott’s Fertilizer  770 770
24 Augusta Sod Co.  6,010 6,010
29 Home Centers Lumber Co.  7,810 7,810
30 23,790 19,240 4,550
(21) (14)

Prepare a schedule of the accounts payable creditor balances, and determine that the total agrees with the ending balance of the accounts payable controlling account.


Answer:

OUT OF EDEN LANDSCAPING CO.
Accounts Payable Creditor Balances
April 30, 2014
Augusta Sod Co. $ 6,010
Concrete Equipment Co. 4,550
Home Centers Lumber Co. 7,810
Schott’s Fertilizer 0
Total accounts payable $18,370
Accounts Payable
(Controlling)
Balance, April 1, 2014 $ 1,990
Total credits (from purchases journal) 23,790
Total debits (from cash payments journal) (7,410)
Balance, April 30, 2014 $18,370

The purchases journal for Wallace Window Cleaners Inc. is shown below.

The purchases journal for Wallace Window Cleaners Inc. is shown below. The accounts payable account has a January 1, 2014, balance of $410 for an amount owed to Little Co. There were no payments made on creditor invoices during January.



Purchases Journal Page 16
Date Account Credited
Post.
Ref.
Accts.
Payable
Cr.
Cleaning
Supplies
Dr.
Other
Accounts
Dr.
Post.
Ref. Amount
2014
Jan. 4 Enviro-Wash Supplies Inc. 570 570
15 Little Co. 290 290
19 Office Mate Inc. 3,050 Office Equipment 3,050
26 Enviro-Wash Supplies Inc. 350 350
31 4,260 1,210 3,050

a. Prepare a T account for the accounts payable creditor accounts.

b. Post the transactions from the purchases journal to the creditor accounts, and determine their ending balances.

c. Prepare T accounts for the accounts payable control and cleaning supplies accounts. Post control totals to the two accounts, and determine their ending balances. Cleaning Supplies had a zero balance at the beginning of the month.

d. Prepare a schedule of the creditor account balances to verify the equality of the sum of the accounts payable creditor balances and the accounts payable controlling account balance.

e. How might a computerized accounting system differ from the use of a purchases journal in recording purchase transactions?


Answer:

a. and b.
Enviro-Wash Supplies Inc. Little Co.
Jan. 4 570 Jan. 1 Bal. 410
26 350 15 290
Bal. 920 Bal. 700
Office Mate Inc.
Jan. 19 3,050
Bal. 3,050
c.
Accounts Payable Cleaning Supplies
Jan. 1 Bal. 410 Jan. 31 1,210
31 4,260 Bal. 1,210
Bal. 4,670
d.
WALLACE WINDOW CLEANERS INC.
Accounts Payable Creditor Balances
January 31, 2014
Enviro-Wash Supplies Inc. $ 920
Little Co. 700
Office Mate Inc. 3,050
Total supplier account balances $4,670
The total in the schedule above agrees with the T account balance for the
accounts payable control account in (c).
e. A computerized system would likely use an electronic form specially designed
for recording purchase transactions. The transaction details would be input
into the form fields and submitted. Once submitted, the transaction would be
saved and automatically posted as a debit to an appropriate asset account and
a credit to the individual creditor accounts payable account. There would be
no control totals posted to a controlling account.

Protection Services Inc. had the following transactions during the month of June:

Protection Services Inc. had the following transactions during the month of June:

June 4. Purchased office supplies from Office Universe Inc. on account, $490.
9. Purchased office equipment on account from Tek Village Inc., $2,790.
16. Purchased office supplies from Office Universe Inc. on account, $140.
21. Purchased office supplies from Paper-to-Go Inc. on account, $225.
27. Paid invoice on June 4 purchase from Office Universe Inc.

a. Record the June purchase transactions for Protection Services Inc. in the purchases journal format shown at the top of the next page.




Purchases Journal
Date Account Credited
Post.
Ref.
Accts.
Payable
Cr.
Office
Supplies
Dr.
Other
Accounts
Dr.
Post.
Ref. Amount


b. What is the total amount posted to the accounts payable and office supplies accounts from the purchases journal for June?

c. What is the June 30 balance of the Office Universe Inc. creditor account assuming a zero balance on June 1?


Answer:

a.
PURCHASES JOURNAL
Date Account Credited
Post.
Ref.
Accounts
Payable
Cr.
Office
Supplies
Dr.
Other
Accounts
Dr.
Post.
Ref. Amount
June 4 Office Universe Inc. 490 490
9 Tek Village, Inc. 2,790 Office Equipment 2,790
16 Office Universe Inc. 140 140
21 Paper-to-Go Inc. 225 225
30 Total 3,645 855 2,790
b. $3,645 Credit to Accounts Payable [from purchases journal column total in (a)].
$855 Debit to Office Supplies [from purchases journal column total in (a)].
c. $140 ($0 + $490 + $140 – $490)

The debits and credits from three related transactions are presented in the following creditor’s account taken

The debits and credits from three related transactions are presented in the following creditor’s account taken from the accounts payable ledger.



NAME Apex Performance Co.
ADDRESS 101 W. Stratford Ave.
Date Item
Post.
Ref. Debit Credit Balance
2014
May 6 P44 12,000 12,000
14 J12 150 11,850
16 CP23 11,850 —

Describe each transaction, and identify the source of each posting.


Answer:
May
6. Purchased services, supplies, equipment, or other commodities on account; posted from purchases journal page 44.
14. Received an invoice adjustment or corrected an error related to purchase of May 6; posted from general journal page 12. (A payment would be recorded in the cash payments journal.)
16. Paid balance owed; posted from cash payments journal page 23.

Using the following cash payments journal, identify each of the posting references, indicated by a letter, as representing

Using the following cash payments journal, identify each of the posting references, indicated by a letter, as representing (1) a posting to a general ledger account, (2) a posting to a subsidiary ledger account, or (3) that no posting is required.


Cash Payments Journal Page 46
Date
Ck.
No. Account Debited
Post.
Ref.
Other
Accounts
Dr.
Accounts
Payable
Dr. Cash Cr.
2014
Aug. 3 611 Utilities Expense (a) 310 310
5 612 Energy Systems Co. (b) 4,000 4,000
10 613 Prepaid Rent (c) 3,200 3,200
16 614 Flowers to Go, Inc. (d) 1,250 1,250
19 615 Advertising Expense (e) 640 640
22 616 Office Equipment (f) 3,600 3,600
25 617 Office Supplies (g) 250 250
26 618 Echo Co. (h) 5,500 5,500
31 619 Salaries Expense (i) 1,750 1,750
31 9,750 10,750 20,500
(j) (k) (l)


Answer:
1. General ledger account: (a), (c), (e), (f), (g), (i), (k), (l)
2. Subsidiary ledger account: (b), (d), (h)
3. No posting required: (j)

Using the following purchases journal, identify each of the posting references Arrow Supply Co

Using the following purchases journal, identify each of the posting references, indicated by a letter, as representing (1) a posting to a general ledger account, (2) a posting to a subsidiary ledger account, or (3) that no posting is required.



Purchases Journal Page 49
Date Account Credited
Post.
Ref.
Accounts
Payable
Cr.
Store
Supplies
Dr.
Office
Supplies
Dr.
Other
Accounts
Dr.
Post.
Ref. Amount
2014
Jan. 4 Coastal Equipment Co. (a) 5,325 Warehouse Equipment (b) 5,325
6 Arrow Supply Co. (c) 4,000 4,000
9 Thorton Products (d) 1,875 1,600 275
14 Office Warehouse (e) 2,200 Office Equipment (f) 2,200
20 Office Warehouse (g) 6,000 Store Equipment (h) 6,000
25 Monroe Supply Co. (i) 2,740 2,740
30 22,140 4,340 4,275 13,525
(j) (k) (l) (m)


Answer:
1. General ledger account: (b), (f), (h), (j), (k), (l)
2. Subsidiary ledger account: (a), (c), (d), (e), (g), (i)
3. No posting required: (m)

Autumn Cove Inc. has $2,010 in the December 1 balance of the accounts receivable account consisting of $880 from Champion Co

Autumn Cove Inc. has $2,010 in the December 1 balance of the accounts receivable account consisting of $880 from Champion Co. and $1,130 from Veritas Co. Transactions related to revenue and cash receipts completed by Autumn Cove Inc. during the month of December 2014 are as follows:


Dec. 3. Issued Invoice No. 622 for services provided to Palace Corp., $2,340.
 5. Received cash from Champion Co., on account, for $880.
 8. Issued Invoice No. 623 for services provided to Sunny Style Inc., $1,690.
12. Received cash from Veritas Co., on account, for $1,130.
18. Issued Invoice No. 624 for services provided to Amex Services Inc., $2,750.
23. Received cash from Palace Corp. for Invoice No. 622.
28. Issued Invoice No. 625 to Veritas Co., on account, for $980.
30. Received cash from Rogers Co. for services provided, $80.

a. Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark () in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted.

b. Prepare a listing of the accounts receivable customer balances and verify that the total of the accounts receivable customer balances equals the balance of the accounts receivable controlling account on December 31, 2014.

c. Why does Autumn Cove Inc. use a subsidiary ledger for accounts receivable?


Answer:

a.
REVENUE JOURNAL Page 19
Date
Invoice
No. Account Debited
Post.
Ref.
Accounts Rec. Dr.
Fees Earned Cr.
2014
Dec. 3 622 Palace Corp. √ 2,340
8 623 Sunny Style Inc. √ 1,690
18 624 Amex Services Inc. √ 2,750
28 625 Veritas Co. √ 980
31 Total 7,760
CASH RECEIPTS JOURNAL Page 25
Date
Account
Credited
Post.
Ref.
Fees
Earned
Cr.
Accts.
Rec.
Cr.
Cash
Dr.
2014
Dec. 5 Champion Co. √ 880 880
12 Veritas Co. √ 1,130 1,130
23 Palace Corp. √ 2,340 2,340
30 Fees Earned 80 80
31 Total 80 4,350 4,430
b.
AUTUMN COVE INC.
Accounts Receivable Customer Balances
December 31, 2014
Amex Services Inc. $2,750
Sunny Style Inc. 1,690
Veritas Co. 980
Total accounts receivable $5,420
The total of the customer accounts on December 31, 2014, $5,420, equals the
balance of the accounts receivable controlling account, shown as follows:
Accounts Receivable
Dec. 1 Bal.
31
Dec. 31 Bal.
2,010
7,760
5,420
Dec. 31 4,350

c. The accounts receivable subsidiary ledger is needed to track customer services provided on account and customer collections. Without the subsidiary ledger, it would not be possible for Autumn Cove Inc. to know who owes how much for services rendered. Furthermore, without the subsidiary ledger, it would be impossible to manage collections from individual customers.

Transactions related to revenue and cash receipts completed by Sycamore Inc. during the

Transactions related to revenue and cash receipts completed by Sycamore Inc. during the
month of October 2014 are as follows:
Oct. 2. Issued Invoice No. 512 to Albany Co., $670.
 4. Received cash from CMI Inc., on account, for $215.
 8. Issued Invoice No. 513 to Gabriel Co., $275.
12. Issued Invoice No. 514 to Ells Inc., $840.
19. Received cash from Ells Inc., on account, $475.
22. Issued Invoice No. 515 to Electronic Central Inc., $150.
27. Received cash from Marshall Inc. for services provided, $145.
29. Received cash from Albany Co. for invoice of October 2.
31. Received cash from McCleary Co. for services provided, $90.

Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark () in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted.


Answer:

REVENUE JOURNAL Page 8
Date
Invoice
No. Account Debited
Post.
Ref.
Accounts Rec. Dr.
Fees Earned Cr.
2014
Oct. 2 512 Albany Co. √ 670
8 513 Gabriel Co. √ 275
12 514 Ells Inc. √ 840
22 515 Electronic Central Inc. √ 150
31 1,935
CASH RECEIPTS JOURNAL Page 12
Date Account Credited Post.
Ref.
Fees Earned
Cr.
Accts.
Rec. Cr.
Cash
Dr.
2014
Oct. 4 CMI Inc. √ 215 215
19 Ells Inc. √ 475 475
27 Fees Earned 145 145
29 Albany Co. √ 670 670
31 Fees Earned 90 90
31 235 1,360 1,595

The revenue and cash receipts journals for Fantasy Productions Inc. are shown below

The revenue and cash receipts journals for Fantasy Productions Inc. are shown below. The accounts receivable control account has a July 1, 2014, balance of $3,670 consisting of an amount due from Crowne Studios Inc.


"Revenue Journal Page 16
Date
Invoice
No. Account Debited
Post.
Ref.
Accts. Rec. Dr.
Fees Earned Cr.
2014
July 6 1 Franklin Broadcasting Co. . . . . . . . . . . . . . . . . . . . . .  1,750
14 2 Gold Coast Media Inc. . . . . . . . . . . . . . . . . . . . . . . . .  4,500
22 3 Franklin Broadcasting Co. . . . . . . . . . . . . . . . . . . . . .  2,200
27 4 Crowne Studios Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .  1,250
28 5 Amber Communications Inc. . . . . . . . . . . . . . . . . . .  3,940
31 13,640
(12) (41)
Cash Receipts Journal Page 36
Date Account Credited
Post.
Ref.
Fees
Earned Cr.
Accts. Rec.
Cr.
Cash
Dr.
2014
July 6 Crowne Studios Inc. . . . . . . . . . . . . . . . . . . . . .  — 3,670 3,670
11 Fees Earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,200 3,200
18 Franklin Broadcasting Co. . . . . . . . . . . . . . . . .  — 1,750 1,750
28 Gold Coast Media Inc. . . . . . . . . . . . . . . . . . .  — 4,500 4,500
31 3,200 9,920 13,120
(41) (12) (11)





Prepare a listing of the accounts receivable customer balances and verify that the total agrees with the ending balance of the accounts receivable controlling account.


Answer:

FANTASY PRODUCTIONS INC.
Accounts Receivable Customer Balances
July 31, 2014
Amber Communications Inc. $3,940
Crowne Studios Inc. 1,250
Franklin Broadcasting Co. 2,200
Gold Coast Media Inc. 0
Total accounts receivable $7,390
Accounts Receivable
(Controlling)
Balance, July 1, 2014 $ 3,670
Total debits (from revenue journal) 13,640
Total credits (from cash receipts journal) (9,920)
Balance, July 31, 2014 $ 7,390