At December 31, 2014, the general ledger and subsidiary ledger for Wow's, a small beauty supply company,
Question:
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Jan. 3 Hair Designs paid $8,000 on its account.
4 New Do paid $900 on its account that had previously been written off.
8 Great Looks purchased $3,000 of merchandise on account.
9 Your Spa paid cash for $2,000 of merchandise.
18 Great Looks returned $500 of merchandise.
19 Luxury Spa paid $5,000 on its account.
20 Great Looks paid $10,000 on is account.
23 Hair Designs purchased $9,000 on account.
24 Ken's Salon paid $3,000 on account.
25 New Do purchased $5,000 of merchandise on Visa.
26 Luxury Spa purchased $12,000 of merchandise on account.
31 Wow determined that the Ken's Salon account receivable was not collectible.
Instructions
(a) Record the above transactions. Ignore credit card fees and inventory and cost of goods sold entries for purposes of this question.
(b) Set up T accounts for the Accounts Receivable general ledger (control) account, the Allowance for Doubtful Accounts general ledger account, and the Accounts Receivable subsidiary ledger accounts. Post the journal entries to these accounts.
(c) Wow estimated that 10% of accounts receivable is not collectible. Record the required adjustment to the allowance for doubtful accounts.
(d) Prepare a list of customers and the balances of their accounts from the subsidiary ledger. Prove that the total of the subsidiary ledger is equal to the control account balance.
TAKING IT FURTHER
What types of errors could result if the total of the account balances in the subsidiary ledger did not agree with the general ledger control account?
Step by Step Answer:
a Jan 3 Cash 8000 Accounts ReceivableHair Design 8000 4 Accounts ReceivableNew Do 900 Allowance for Doubtful Accounts 900 Cash 900 Accounts ReceivableNew Do 900 8 Accounts ReceivableGreat Looks 3000 Sales 3000 9 Cash 2000 Sales 2000 18 Sales Returns and Allowances 500 Accounts ReceivableGreat Looks 500 19 Cash 5000 Accounts ReceivableLuxury Spa 5000 20 Cash 10000 Accounts ReceivableGreat Looks 10000 23 Accounts ReceivableHair Designs 9000 Sales 9000 24 Cash 3000 Accounts ReceivableKens Salon 3000 25 Cash 5000 Sales 5000 26 Accounts ReceivableLuxury Spa 12000 Sales 12000 Jan 31 Allowance for Doubtful Accounts 6000 Accounts ReceivableKens Salon 6000 Accounts Receivable ...View the full answer
Accounting Principles Part 2
ISBN: 978-1118306796
6th Canadian edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow
