Comprehensive Problem 2: Accounting Cycle with Subsidiary Ledgers, Part 1

1. During the second half of December 20-1, TJs Specialty Shop engaged in the following transactions:

   Dec.	16	Received payment from Lucy Greene on account, $1,960.
   	16	Sold merchandise on account to Kim Fields, $160, plus sales tax of $8. Sale No. 640.
   	17	Returned merchandise to Evans Essentials for credit, $150.
   	18	Issued Check No. 813 to Evans Essentials in payment of December 1 balance of $1,250, less the credit received on December 17.
   	19	Sold merchandise on account to Lucy Greene, $620, plus tax of $31. Sale No. 641.
   	22	Received payment from John Dempsey on account, $1,560.
   	23	Issued Check No. 814 for the purchase of supplies, $120. (Debit Supplies)
   	24	Purchased merchandise on account from West Wholesalers, $1,200. Invoice No. 465, dated December 24, terms n/30.
   	26	Purchased merchandise on account from Nathen Co., $800. Invoice No. 817, dated December 26, terms 2/10, n/30.
   	27	Issued Check No. 815 to KC Power & Light (Utilities Expense) for the month of December, $630.
   	27	Sold merchandise on account to John Dempsey, $2,020, plus tax of $101. Sale No. 642.
   	29	Received payment from Martha Boyle on account, $2,473.
   	29	Issued Check No. 816 in payment of wages (Wages Expense) for the two-week period ending December 28, $1,100.
   	30	Issued Check No. 817 to Meyers Trophy Shop for a cash purchase of merchandise, $200.

   As of December 16, TJs account balances were as follows:

   TJs also had the following subsidiary ledger balances as of December 16:

   Accounts Receivable Ledger			Accounts Payable Ledger
   Customer	Balance		Vendor	Balance
   Martha Boyle			Evans Essentials
   12 Jude Lane			34 Harry Ave
   Hartford, CT 06117	$3,796		East Hartford, CT 05234	$3,600
   Anne Clark			Nathen Co.
   52 Juniper Road			1009 Drake Rd.
   Hartford, CT 06118	2,100		Farmington, CT 06082
   John Dempsey			Owen Enterprises
   700 Hobbes Dr.			43 Lucky Lane
   Avon, CT 06108	1,560		Bristol, CT 06007
   Kim Fields			West Wholesalers
   5200 Hamilton Ave.			888 Anders Street
   Hartford, CT 06117			Newington, CT 06789
   Lucy Greene
   236 Bally Lane
   Simsbury, CT 06123	2,800

   At the end of the year, the following adjustments (a)(j) need to be made:

   a., b.	Merchandise inventory as of December 31, $19,700.
   c., d., e.	Jones estimates that customers will be granted $400 in refunds of this years sales next year, and the merchandise expected to be returned will have a cost of $300.
   f.	Unused supplies on hand, $525.
   g.	Unexpired insurance on December 31, $1,000.
   h.	Depreciation expense on the building for the year, $800.
   i.	Depreciation expense on the store equipment for the year, $450.
   j.	Wages earned but not paid as of December 31, $330.

   Required

   For those not using working papers:

   • 1.

     If you are not using the working papers, open a general ledger, an accounts receivable ledger, and an accounts payable ledger as of December 16. Enter the December 16 balance of each of the accounts, with a check mark in the Posting Reference column.

   For working paper users and nonusers:

   • 2.

     Enter transactions for the second half of December in the general journal. Post immediately to the accounts receivable and accounts payable ledgers.

   • 3.

     Post from the journal to the general ledger.

   • 4.

     Prepare schedules of accounts receivable and accounts payable.

   • 5.

     Prepare a year-end spreadsheet, an income statement, a statement of owners equity, and a balance sheet. The mortgage payable includes $600 that is due within one year.

   • 6.

     Journalize and post adjusting entries.

   • 7.

     Journalize and post closing entries. (Hint: Close all expense and revenue account balances. Then, close Income Summary and Tom Jones, Drawing to Tom Jones, Capital.)

   • 8.

     Prepare a post-closing trial balance.

   • 9.

     Journalize and post reversing entries for the adjustments where appropriate, as of January 1, 20-2.