Purchases and cash payments journals; accounts payable subsidiary and general ledgers Obj. 2

General Ledger West Texas Exploration Co. was established on October 15 to provide oil-drilling services. West Texas uses field equipment (rigs and pipe) and field supplies (drill bits and lubricants) in its operations. Transactions related to purchases and cash payments during the remainder of October are as follows:

Oct. 16. Issued Check No. 1 in payment of rent for the remainder of October, $7,000. 16. Purchased field equipment on account from Petro Services Inc., $32,600. Oct. 17. Purchased field supplies on account from Midland Supply Co., $9,780. 18. Issued Check No. 2 in payment of field supplies, $4,570, and office supplies, $650. 20. Purchased office supplies on account from A-One Office Supply Co., $1,320. Post the journals to the accounts payable subsidiary ledger. 24. Issued Check No. 3 to Petro Services Inc., in payment of October 16 invoice. 26. Issued Check No. 4 to Midland Supply Co. in payment of October 17 invoice. 28. Issued Check No. 5 to purchase land, $240,000. 28. Purchased office supplies on account from A-One Office Supply Co., $3,670. Post the journals to the accounts payable subsidiary ledger. 30. Purchased the following from Petro Services Inc. on account: field supplies, $25,300 and office equipment, $5,500. 30. Issued Check No. 6 to A-One Office Supply Co. in payment of October 20 invoice. 30. Purchased field supplies on account from Midland Supply Co., $12,450. 31. Issued Check No. 7 in payment of salaries, $32,000. 31. Rented building for one year in exchange for field equipment having a cost of $15,000. Post the journals to the accounts payable subsidiary ledger.

Instructions

1.Journalize the transactions for October. Use a purchases journal and a cash payments journal similar to those illustrated in this chapter and a two-column general journal. Set debit columns for Field Supplies, Office Supplies, and Other Accounts in the purchases journal. Refer to the following partial chart of accounts:

Inventories At the points indicated in the narrative of transactions, post to the following subsidiary accounts in the accounts payable ledger:

A-One Office Supply Co. Midland Supply Co. Petro Services Inc. Answer Check Figure: Total cash payments, $327,920

2.Post the individual entries (Other Accounts columns of the purchases journal and the cash payments journal; both columns of the general journal) to the appropriate general ledger accounts.

3.Total each of the columns of the purchases journal and the cash payments journal, and post the appropriate totals to the general ledger. (Because the problem does not include transactions related to cash receipts, the cash account in the ledger will have a credit balance.)

4. Sum the balances of the accounts payable creditor balances.

5. Why might West Texas consider using a subsidiary ledger for the field equipment?