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

SOLUTION TO EXERCISE F-5

(a)

PW COMPANY

Sales journal

PW COMPANY

Cash Receipts Journal

TIP: Purchase returns for cash are recorded in the cash receipts journal. Returns to suppliers on credit are recorded in the general journal unless a special journal for credit returns is established.

TIP: Nothing appears in the reference column in this solution because no instructions were given regarding postings. Recall, however, that amounts are usually posted to the subsidiary ledger daily. Postings will be illustrated in the next exercise.

TIP: When a periodic (rather than perpetual) inventory system is used, the sales journal will have only a single column (for Accounts Receivable Dr. and Sales Cr.)

(b) To foot a journal means to sum each column in the journal. Thus, adding the amounts in the two columns in the sales journal constitutes footing the journal. There are six individual columns of figures to be added to foot the cash receipts journal. To cross-foot a journal means to prove the equality of the debits and credits recorded therein. Because each of the two columns in the sales journal has a total that gets posted both as a debit and a credit, there is nothing to cross-foot. In the cash receipts journal, the totals of the debit columns are added together ($2,242 + $13 = $2,255) ...