Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE F-6

Purpose: (L.O. 1, 3) This exercise illustrates the relationship of the accounts receivable subsidiary ledger to the Accounts Receivable control account in the general ledger.

PW Company has four customer accounts in its accounts receivable ledger. The following balances appeared in that subsidiary ledger at July 1, 2014:

The cash receipts journal and the sales journal for July are reproduced below (from the Solution to Exercise F-5).

The accounts receivable subsidiary ledger and selected accounts from the general ledger appear below. Some accounts have a balance at July 1, 2014 as shown.

Instructions

(a) Post the transactions to both the general ledger and the subsidiary ledger accounts. (Show the appropriate cross references in both the journals and the ledgers.)

(b) Prove the agreement of the subsidiary ledger and its control account.

(c) Explain how an accountant unfamiliar with a company could examine your work and determine the following:

1. What accounts are to receive postings from the sales journal?
2. Have the postings been completed to the general ledger accounts?
3. Have the postings been completed to the subsidiary ledger accounts?
4. What was the source of the $50 credit to the Utilities Expense account on July 30?

TIP: If you wish to more closely simulate a real life situation, you will post the transactions in chronological order. If you post all of the transactions ...