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CHAPTER 8
ACCOUNTING FOR PURCHASES AND ACCOUNTS PAYABLE
Chapter Opener: Thinking Critically
Students may discuss one or more of the following merchandise selection tools: consumer surveys,
customer requests, or sales history reports.
Fast Facts
• Net revenues for 2009 declined 8%, from $3.4 billion in 2008 to $3.1 billion in 2009
• Williams-Sonoma, Inc. owns and operates six separate, home-centered retail businesses: Williams-
Sonoma, Pottery Barn, Pottery Barn Kids, PBTeen, Williams-Sonoma Home and West Elm.
• The company operates 590 retail stores.
Managerial Implications: Thinking Critically

Answers will vary. Students should recognize the need for checks and balances for avoiding theft
and waste.
Discussion Questions
Note to instructor: These questions are designed to check students’ understanding of the new terms,
concepts, and procedures presented in the chapter.
1. Audit trail.
2. Authorization of purchase, check-in of goods, verification of invoice, proper authorization of
payment, division of labor and tasks, use of prenumbered forms.
3. Documentation of credit issued.
4. Allowance made for damaged merchandise.
5. Documentation of returned merchandise.
6. List of all creditors and the balance owed to each. Prepared so that its total can be proved against the
balance of the Accounts Payable account.
7. The Accounts Payable account is the control account; summarizes the balances of the creditor
accounts.
8. Individual accounts of all creditors.
9. Helps pay bills promptly and maintain a good credit reputation.
10. Add Freight In to Purchases, then deduct Purchases Returns and Allowances.
11. Purchases journal.
12. Purchase invoice denotes incoming merchandise, sales invoice denotes outgoing (sold) merchandise.
13. Debit.
14. Income Statement in the Cost of Goods Sold section.
15. Business managers analyze this account to identify problem suppliers.
Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8  241
Discussion Questions (continued)
16. a. Net amount of the invoice is due 30 days after the date of the invoice. b. If the invoice is paid
within 10 days of its date, a 2 percent discount may be taken; otherwise, the total amount is due in
30 days. c. The amount of the invoice is due 10 days after the end of the month in which the
invoice is issued. d. Payment in full is due 20 days after date of the invoice. e. If the invoice is
paid within 10 days of its date, a 1% discount may be taken; otherwise the total amount is due in
20 days. f. If payment is made within 5 days of its date, a 3 percent discount may be taken;
otherwise the total amount is due in 30 days. g. Payment in full is due 15 days after the end of the
month in which the invoice is issued.
17. Not entered in purchases journal; only used for recording merchandise purchased for resale. It
should be recorded in the general journal.
242  Chapter 8 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
EXERCISE 8.1
1. Purchases journal 4. Purchases journal

2. General journal 5. General journal
3. Cash Payments journal 6. Cash Payments journal
EXERCISE 8.2
Dr. Cr. Dr. Cr.

1. 501 205 4. 501, 502 205
2. 205 503 5. 205 503
3. 205 101 6. 501 101
EXERCISE 8.3
PURCHASES JOURNAL PAGE
ACCOUNTS
INVOICE INVOICE POST. PAYABLE PURCHASES FREIGHT IN
DATE PURCHASED FROM NUMBER DATE TERMS REF. CREDIT DEBIT DEBIT
2013
July 1 Auto Parts Corp. 6812 6/27 n/30 2 0 8 2 00 1 9 6 0 00 1 2 2 00
3 Aplex Company 441 6/30 1/10, n/60 3 2 2 9 00 3 1 5 0 00 7 9 00
5 The Custom Sounds Shop, Inc. 5601 7/1 2/10, n/30 2 4 8 7 00 2 3 7 0 00 1 1 7 00
10 Speciality Tire Company 1102 7/8 2/10, n/30 4 1 7 0 00 4 1 7 0 00
EXERCISE 8.4
GENERAL JOURNAL PAGE
POST.
DATE DESCRIPTION REF. DEBIT CREDIT
1 2013 1
2 Feb. 9 Accounts Payable/J&B Appliance Corporation 4 2 2 0 00 2
3 Purchases Returns & Allowances 4 2 2 0 00 3
4 Received Credit Memo 244 for damaged 4
5 merchandise that was returned; original 5
6 purchase made on Invoice 4101, January 3, 2013 6
7 7
8 8
9 9
10 10
EXERCISE 8.5
GENERAL JOURNAL PAGE
POST.
1 2013 1
2 Mar. 17 Accounts Payable/Four Star Appliance Mart 1 1 2 5 00 2
3 Purchases Returns and Allowances 1 1 2 5 00 3
5 merchandise; original purchase made on 5
6 Invoice 911, February 20, 2013 6
7 7
EXERCISE 8.6
Purchases $52,995
Freight In 2,825
Delivered Cost of Purchases $55,820
Less Purchases Returns and Allowances 5,120
Net Delivered Cost of Purchases $50,700
EXERCISE 8.7
a. The total of the schedule of accounts payable will not equal the balance of the
Accounts Payable control account.
b. The total of the schedule of accounts payable will not equal the balance of the
Accounts Payable control account.
c. Jackson Company will notify us that their invoice has not been paid.
d. Statements from Jackson Company and Baxton Company will not agree with the
balance reflected in the accounts payable subsidiary ledger.
EXERCISE 8.8
a. Purchases, $93,425
b. Purchases Returns and Allowances, $3,875
c. Freight In, $6,230
d. Delivered Cost of Purchases $101,700
PROBLEM 8.1A
PURCHASES JOURNAL PAGE 14
ACCOUNTS
2013
June 1 Pro Photo Equipment 4241 5/27 n/60 ✔ 2 1 3 0 00 1 9 5 0 00 1 8 0 00
8 Photo Supplies 1102 6/3 n/45 ✔ 1 3 8 4 00 1 3 8 4 00
12 Nano Glass 7282 6/9 1/10, n/60 ✔ 9 0 6 00 9 0 6 00
20 Photo Supplies 1148 6/15 n/45 ✔ 1 1 6 5 00 1 1 0 0 00 6 5 00
23 Hi-Qual Case 3108 6/18 n/45 ✔ 1 9 4 6 00 1 9 4 6 00
28 Holtz Spectrum 5027 6/24 2/10, n/30 ✔ 2 4 8 0 00 2 3 7 0 00 1 1 0 00
30 Totals 10 0 1 1 00 9 6 5 6 00 3 5 5 00
( 2 0 5 ) ( 5 0 1 ) ( 5 0 2)
PROBLEM 8.1A (continued)
GENERAL JOURNAL PAGE 38
POST.
1 2013 1
2 June 18 Accounts Payable/Pro Photo Equipment 205 2
✔ 3 5 0 00
4 Received Credit Memo 110 for defective 4
5 cameras that were returned; original purchase 5
6 made on Invoice 4241, May 27, 2013 6
7 7
8 30 Accounts Payable/Hi-Qual Case 205 8
✔ 2 6 0 00 2 6 0 00
9 Purchases Returns and Allowances 503 9
10 Received Credit Memo 1108 for allowance for 10
11 damaged merchandise; original purchase 11
12 made on Invoice 3108, June 18, 2013 12
13 13
14 14
15 15
16 16
17 17
GENERAL LEDGER
ACCOUNT Accounts Payable ACCOUNT NO. 205
POST. BALANCE
DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT
2013
June 1 Balance ✔ 13 9 0 4 00
18 J38 3 5 0 00 13 5 5 4 00
30 J38 2 6 0 00 13 2 9 4 00
30 P14 10 0 1 1 00 23 3 0 5 00
ACCOUNT Purchases ACCOUNT NO. 501
POST. BALANCE
2013
June 30 P14 9 6 5 6 00 9 6 5 6 00
ACCOUNT Freight In ACCOUNT NO. 502
POST. BALANCE
2013
June 30 P14 3 5 5 00 3 5 5 00
ACCOUNT Purchases Returns and Allowances ACCOUNT NO. 503
POST. BALANCE
2013
June 18 J38 3 5 0 00 3 5 0 00
30 J38 2 6 0 00 6 1 0 00
Purchases $9,656
Freight In 355
Less Purchases Returns and Allowances 610
Analyze: Total purchases in June were $9,656.
PROBLEM 8.2A
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME Hi-Qual Case TERMS n/45
POST.
DATE DESCRIPTION REF. DEBIT CREDIT BALANCE
2013
June 1 Balance ✔ 1 2 0 0 00
23 Invoice 3108, 6/18/13 P14 1 9 4 6 00 3 1 4 6 00
30 Credit Memo 1108 J38 2 6 0 00 2 8 8 6 00
NAME Holtz Spectrum TERMS 2/10, n/30
POST.
2013
June 28 Invoice 5027, 6/24/13 P14 2 4 8 0 00 2 4 8 0 00
NAME Nano Glass TERMS 1/10, n/60
POST.
2013
June 1 Balance ✔ 2 2 2 4 00
12 Invoice 7282, 6/9/13 P14 9 0 6 00 3 1 3 0 00
NAME Photo Supplies TERMS n/45
POST.
2013
June 1 Balance ✔ 10 4 8 0 00
8 Invoice 1102, 6/3/13 P14 1 3 8 4 00 11 8 6 4 00
20 Invoice 1148, 6/15/13 P14 1 1 6 5 00 13 0 2 9 00
NAME Pro Photo Equipment TERMS n/60
POST.
2013
June 1 Invoice 4241, 5/27/13 P14 2 1 3 0 00 2 1 3 0 00
18 Credit Memo 110 J38 3 5 0 00 1 7 8 0 00
Qwik Photo Club

Schedule of Accounts Payable
June 30, 2013
Hi-Qual Case 2 8 8 6 00
Holtz Spectrum 2 4 8 0 00
Nano Glass 3 1 3 0 00
Photo Supplies 13 0 2 9 00
Pro Photo Equipment 1 7 8 0 00
Total 23 3 0 5 00
Analyze: The balance owed to Nano Glass on June 30 is $3,130.
PROBLEM 8.3A
ACCOUNTS
2013
July 1 Brown Corporation 1011 6/26 n/60 ✔ 9 4 5 9 00 9 2 1 0 00 2 4 9 00
5 Brooks Garden Furniture Co. 639 7/2 n/45 ✔ 4 9 2 2 00 4 3 7 0 00 5 5 2 00
9 Lawn and Gardens Supply 8164 7/5 n/30 ✔ 1 3 9 0 00 1 3 9 0 00
19 Lawn and Gardens Supply 9050 7/15 n/30 ✔ 1 4 5 6 00 1 2 0 0 00 2 5 6 00
21 Cameron Rubber Company 1785 7/17 1/15, n/60 ✔ 3 9 0 4 00 3 6 8 0 00 2 2 4 00
31 Wilson Industrial Products 8985 7/26 2/10, n/30 ✔ 10 5 8 8 00 10 3 1 0 00 2 7 8 00
31 31 7 1 9 00 30 1 6 0 00 1 5 5 9 00
( 2 0 5) ( 5 0 1) ( 5 0 2)
POST.
1 2013 1
2 July 16 Accounts Payable/Brooks Garden Furniture Company 205 2
✔ 6 0 0 00
6 made on Invoice 639, July 2 6
7 7
8 28 Accounts Payable/Cameron Rubber Company 205 8
✔ 4 3 0 00
12 purchase made on Invoice 1785, July 17 12
13 13
14 14
15 15
GENERAL LEDGER
POST. BALANCE
2013
July 1 Balance ✔ 35 8 8 0 00
16 J20 6 0 0 00 35 2 8 0 00
28 J20 4 3 0 00 34 8 5 0 00
31 P8 31 7 1 9 00 66 5 6 9 00
POST. BALANCE
2013
July 31 P8 30 1 6 0 00 30 1 6 0 00
POST. BALANCE
2013
July 31 P8 1 5 5 9 00 1 5 5 9 00
POST. BALANCE
2013
July 16 J20 6 0 0 00 6 0 0 00
28 J20 4 3 0 00 1 0 3 0 00
Purchases $30,160
Freight In 1,559
NAME Brooks Garden Furniture Company TERMS n/45
POST.
2013
July 1 Balance ✔ 11 1 2 0 00
5 Invoice 639, 7/2/13 P8 4 9 2 2 00 16 0 4 2 00
16 CM 110 J20 6 0 0 00 15 4 4 2 00
NAME Brown Corporation TERMS n/60
POST.
2013
July 1 Balance ✔ 18 1 2 0 00
1 3 P8 9 4 5 9 00 27 5 7 9 00
NAME Cameron Rubber Company TERMS 1/15, n/60
POST.
2013
July 21 Invoice 1785, 7/17/13 P8 3 9 0 4 00 3 9 0 4 00
28 Credit Memo 223 J20 4 3 0 00 3 4 7 4 00
NAME Lawn & Gardens Supply TERMS n/30
POST.
2013
July 1 Balance ✔ 6 6 4 0 00
9 Invoice 8164, 7/5/13 P8 1 3 9 0 00 8 0 3 0 00
19 Invoice 9050, 7/15/13 P8 1 4 5 6 00 9 4 8 6 00
NAME Wilson Industrial Products TERMS 2/10, n/30
POST.
2013
July 31 Invoice 8985, 7/26/13 P8 10 5 8 8 00 10 5 8 8 00
The English Garden Shop

July 31, 2013
Brooks Garden Furniture Company 15 4 4 2 00

Brown Corporation 27 5 7 9 00
Cameron Rubber Company 3 4 7 4 00
Lawn and Gardens Supply 9 4 8 6 00
Wilson Industrial Products 10 5 8 8 00
Total 66 5 6 9 00
Analyze: Total freight charges for the month of July were $1,559.
PROBLEM 8.4A
ACCOUNTS
2013
Sept. 3 Dalton Office Furniture Co. 4213 8/29 n/30 ✔ 8 1 3 2 00 7 9 2 0 00 2 1 2 00
7 Apex Office Machines, Inc. 9217 9/2 n/60 ✔ 11 3 0 0 00 11 3 0 0 00
16 Davis Corporation 8066 9/11 n/30 ✔ 2 6 8 0 00 2 5 5 6 00 1 2 4 00
20 Apex Office Machines, Inc. 11011 9/15 n/60 ✔ 1 0 0 0 00 1 0 0 0 00
23 Brown Paper Company 6498 9/18 1/10, n/30 ✔ 7 6 0 0 00 7 5 0 0 00 1 0 0 00
30 Zenn Furniture, Inc. 696 9/25 2/10, n/30 ✔ 4 0 0 0 00 3 8 4 0 00 1 6 0 00
30 34 7 1 2 00 34 1 1 6 00 5 9 6 00
( 2 0 5) ( 5 0 1) ( 5 0 2)
POST.
1 2013 1
2 Sept. 10 Accounts Payable/Dalton Office Furniture Co. 205 2
✔ 6 0 0 00
6 made on Invoice 4213, August 29 6
7 7
8 28 Accounts Payable/Apex Office Machines, Inc. 205 8
✔ 8 8 0 00
12 purchase made on Invoice 11011, September 15 12
13 13
14 14
15 15
GENERAL LEDGER
POST. BALANCE
2013
Sept. 1 Balance ✔ 28 2 5 6 00
10 J14 6 0 0 00 27 6 5 6 00
28 J14 8 8 0 00 26 7 7 6 00
30 P5 34 7 1 2 00 61 4 8 8 00
POST. BALANCE
2013
Sept. 30 P5 34 1 1 6 00 34 1 1 6 00
POST. BALANCE
2013
Sept. 30 P5 5 9 6 00 5 9 6 00
POST. BALANCE
2013
Sept. 10 J14 6 0 0 00 6 0 0 00
28 J14 8 8 0 00 1 4 8 0 00
Purchases $34,116
Freight In 596
NAME Apex Office Machines, Inc. TERMS n/60
POST.
2013
Sept. 1 Balance ✔ 10 9 6 0 00
7 Invoice 9217, 9/2/13 P5 11 3 0 0 00 22 2 6 0 00
20 Invoice 11011, 7/2/13 P5 1 0 0 0 00 23 2 6 0 00
28 Credit Memo 312 J14 8 8 0 00 22 3 8 0 00
NAME Brown Paper Company TERMS 1/10, n/30
POST.
2013
Sept. 1 Balance ✔ 2 1 2 0 00
23 Invoice 6498, 9/18/13 P5 7 6 0 0 00 9 7 2 0 00
NAME Dalton Office Furniture Company TERMS n/30
POST.
2013
Sept. 1 Balance ✔ 9 5 7 6 00
3 Invoice 4213, 8/29/13 P5 8 1 3 2 00 17 7 0 8 00
10 Credit Memo 511 J14 6 0 0 00 17 1 0 8 00
NAME Davis Corporation TERMS n/30
POST.
2010
Sept. 16 Invoice 8066, 9/11/13 P5 2 6 8 0 00 2 6 8 0 00
NAME Zenn Furniture, Inc. TERMS 2/10, n/30
POST.
2010
Sept. 1 Balance ✔ 5 6 0 0 00
30 Invoice 696, 9/25/13 P5 4 0 0 0 00 9 6 0 0 00
Professional Office Products Center

September 30, 2013
Apex Office Machines, Inc. 22 3 8 0 00
Brown Paper Company 9 7 2 0 00
Dalton Office Furniture Company 17 1 0 8 00
Davis Corporation 2 6 8 0 00
Zenn Furniture, Inc. 9 6 0 0 00
Total 61 4 8 8 00
Analyze: Total purchases returns and allowances for September were $1,480.
This represents 4.34% of the total purchases ($1,480/$34,116).
PROBLEM 8.1B
ACCOUNTS
2013
May 1 East Coast Snow Shop 6572 4/28 n/45 ✔ 5 7 2 0 00 5 6 0 0 00 1 2 0 00
8 May-Day Ski Shop 4916 5/2 n/30 ✔ 12 5 0 0 00 12 5 0 0 00
12 Fashion Ski Wear 986 5/11 n/60 ✔ 5 0 0 0 00 5 0 0 0 00
16 May-Day Ski Shop 5011 5/15 n/30 ✔ 2 6 5 0 00 2 6 5 0 00
22 Winter Sports Clothing 4019 5/16 1/10, n/60 ✔ 3 1 6 0 00 3 1 6 0 00
31 Golden Skis & Clothing 8354 5/27 2/10, n/30 ✔ 3 8 5 0 00 3 6 3 0 00 2 2 0 00
31 32 8 8 0 00 32 5 4 0 00 3 4 0 00
( 2 0 5 ) ( 5 0 1 ) ( 5 0 2)
PROBLEM 8.1B (continued)
POST.
1 2013 1
2 May 9 Accounts Payable/East Coast Snow Shop 205 2
✔ 1 2 5 0 00
3 Purchases Returns and Allowances 503 1 2 5 0 00 3
5 ski boots that were returned; original sale 5
6 made on Invoice 6572, April 28, 2013 6
7 7
8 28 Accounts Payable/May-Day Ski Shop 205 8
✔ 3 8 0 00
10 Received Credit Memo 38 for defective ski poles 10
11 that were returned; original purchase made on 11
12 Invoice 5011, May 15, 2013 12
13 13
14 14
GENERAL LEDGER
POST. BALANCE
2013
May 1 Balance ✔ 21 6 0 8 00
10 J38 1 2 5 0 00 20 3 5 8 00
28 J38 3 8 0 00 19 9 7 8 00
31 P15 32 8 8 0 00 52 8 5 8 00
POST. BALANCE
2013
May 31 P15 32 5 4 0 00 32 5 4 0 00
POST. BALANCE
2013
May 31 P15 3 4 0 00 3 4 0 00
POST. BALANCE
2013
May 9 J38 1 2 5 0 00 1 2 5 0 00
28 J38 3 8 0 00 1 6 3 0 00
Purchases $32,540
Freight In 340
Analyze: Total accounts payable of $32,880 was posted from the purchases journal to the general
ledger for May.
PROBLEM 8.2B
NAME East Coast Snow Shop TERMS n/45
POST.
2013
May 1 Balance ✔ 6 1 8 8 00
1 Invoice 6572, 4/28/13 P15 5 7 2 0 00 11 9 0 8 00
9 CM 155 J38 1 2 5 0 00 10 6 5 8 00
NAME Fashion Ski Wear TERMS n/60
POST.
2013
May 1 Balance ✔ 8 7 2 0 00
12 Invoice 986, 5/11/13 P15 5 0 0 0 00 13 7 2 0 00
NAME Golden Skis & Clothing TERMS 2/10, n/30
POST.
2013
May 31 Invoice 8354, 5/27/13 P15 3 8 5 0 00 3 8 5 0 00
NAME May-Day Ski Shop TERMS n/30
POST.
2013
May 1 Balance ✔ 1 7 0 0 00
8 Invoice 4916, 5/2/13 P15 12 5 0 0 00 14 2 0 0 00
16 Invoice 5011, 5/15/13 P15 2 6 5 0 00 16 8 5 0 00
28 CM 38 J38 3 8 0 00 16 4 7 0 00
NAME Winter Sports Clothing TERMS 1/10, n/60
POST.
2013
May 1 Balance ✔ 5 0 0 0 00
22 Invoice 4019, 5/16/13 P15 3 1 6 0 00 8 1 6 0 00
Eskimo Ski Shop

May 31, 2013
East Coast Snow Shop 10 6 5 8 00
Fashion Ski Wear 13 7 2 0 00
Golden Skis & Clothing 3 8 5 0 00
May-Day Ski Shop 16 4 7 0 00
Winter Sports Clothing 8 1 6 0 00
Total 52 8 5 8 00
Analyze: Eskimo Ski Shop owed East Coast Snow Shop $10,658 on May 31.
PROBLEM 8.3B
ACCOUNTS
2013
Dec. 1 Selby Corporation 2110 11/26 n/45 ✔ 5 9 3 6 00 5 7 8 0 00 1 5 6 00
5 Patio Furniture Shop 633 12/2 1/15, n/60 ✔ 5 8 0 0 00 5 7 0 0 00 1 0 0 00
9 Spring Lawn Center 1127 12/4 n/30 ✔ 1 1 4 8 00 1 1 4 8 00
19 Spring Lawn Center 1131 12/15 n/30 ✔ 1 7 5 6 00 1 6 0 0 00 1 5 6 00
21 Delta Rubber Company 8517 12/17 n/60 ✔ 8 3 6 00 7 6 0 00 7 6 00
31 Cason Industries 8819 12/26 2/10, n/30 ✔ 3 7 8 0 00 3 7 0 0 00 8 0 00
31 19 2 5 6 00 18 6 8 8 00 5 6 8 00
( 2 0 5 ) ( 5 0 1 ) ( 5 0 2 )
POST.
1 2013 1
2 Dec. 16 Accounts Payable/Patio Furniture Shop 205 2
✔ 4 0 0 00
6 made on Invoice 633, December 2 6
7 7
8 28 Accounts Payable/Delta Rubber Company 205 8
✔ 1 5 0 00
12 purchase made on Invoice 8517, December 17 12
13 13
14 14
15 15
GENERAL LEDGER
POST. BALANCE
2013
Dec. 1 Balance ✔ 13 4 9 0 00
16 J20 4 0 0 00 13 0 9 0 00
28 J20 1 5 0 00 12 9 4 0 00
30 P8 19 2 5 6 00 32 1 9 6 00
POST. BALANCE
2013
Dec. 31 P8 18 6 8 8 00 18 6 8 8 00
POST. BALANCE
2013
Dec. 31 P8 5 6 8 00 5 6 8 00
POST. BALANCE
2013
Dec. 16 J20 4 0 0 00 4 0 0 00
28 J20 1 5 0 00 5 5 0 00
Purchases $18,688
Freight In 568
NAME Cason Industries TERMS 2/10, n/30
POST.
2013
Dec. 1 Balance ✔ 2 1 5 0 00
31 Invoice 8819, 12/26/13 P8 3 7 8 0 00 5 9 3 0 00
NAME Delta Rubber Company TERMS n/60
POST.
2013
Dec. 1 Balance ✔ 3 8 5 0 00
21 Invoice 8517, 12/17/13 P8 8 3 6 00 4 6 8 6 00
28 CM 210 J20 1 5 0 00 4 5 3 6 00
NAME Patio Furniture Shop TERMS 1/15, n/60
POST.
2013
Dec. 5 Invoice 633, 12/2/13 P8 5 8 0 0 00 5 8 0 0 00
16 CM 101 J20 4 0 0 00 5 4 0 0 00
NAME Selby Corporation TERMS n/45
POST.
2013
Dec. 1 Balance ✔ 4 8 4 2 00
1 Invoice 2110, 11/26/13 P8 5 9 3 6 00 10 7 7 8 00
NAME Spring Lawn Center TERMS n/30
POST.
2013
Dec. 1 Balance ✔ 2 6 4 8 00
9 Invoice 1127, 12/4/13 P8 1 1 4 8 00 3 7 9 6 00
19 Invoice 1131, 12/15/13 P8 1 7 5 6 00 5 5 5 2 00
The Landscape Supply Center

December 31, 2013
Cason Industries 5 9 3 0 00
Delta Rubber Company 4 5 3 6 00
Patio Furniture Shop 5 4 0 0 00
Selby Corporation 10 7 7 8 00
Spring Lawn Center 5 5 5 2 00
Total 32 1 9 6 00
Analyze: Accounts Payable increased by $18,706 during the month of December.
PROBLEM 8.4B
ACCOUNTS
2013
Feb. 5 Packing & Mail Supply
Center 502 2/2 2/10, n/30 ✔ 2 1 0 0 00 2 0 0 0 00 1 0 0 00
8 center 2808 2/5 2/10, n/30 ✔ 1 9 0 0 00 1 9 0 0 00
12 Gifts and Holiday Cards 2904 2/8 2/10, n/30 ✔ 1 2 0 0 00 1 2 0 0 00
13 Specialty Business Cards 2013 2/9 1/10, n/45 ✔ 1 1 0 0 00 1 1 0 0 00
19 Business Forms, Inc. 2019 2/16 n/30 ✔ 2 0 4 0 00 1 9 8 0 00 6 0 00
21 Specialty Business Cards 1376 2/19 1/10, n/45 ✔ 3 7 1 0 00 3 6 0 0 00 1 1 0 00
28 12 0 5 0 00 11 7 8 0 00 2 7 0 00
( 2 0 3 ) ( 5 0 1 ) ( 5 0 2 )
POST.
1 2013 1
2 Feb. 20 Accounts Payable/Gifts and Holiday Cards 203 2
✔ 2 0 0 00
6 Invoice 2808, dated February 5 6
7 7
8 28 Accounts Payable/Gifts and Holiday Cards 203 8
✔ 2 4 0 00
12 Invoice 2904, February 12 12
13 13
14 14
15 15
GENERAL LEDGER
POST. BALANCE
2013
Feb. 1 Balance ✔ 15 2 0 0 00
20 J12 2 0 0 00 15 0 0 0 00
27 J12 2 4 0 00 14 7 6 0 00
28 P4 12 0 5 0 00 26 8 1 0 00
POST. BALANCE
2013
Feb. 28 P4 11 7 8 0 00 11 7 8 0 00
POST. BALANCE
2013
Feb. 28 P4 2 7 0 00 2 7 0 00
POST. BALANCE
2013
Feb. 20 J12 2 0 0 00 2 0 0 00
27 J12 2 4 0 00 4 4 0 00
Purchases $11,780
Freight In 270
NAME Business Forms, Inc. TERMS n/30
DATE DESCRIPTION POST.REF. DEBIT CREDIT BALANCE

2013
Feb. 1 Balance ✔ 8 0 0 0 00
19 Invoice 2019, 2/16/13 2 0 4 0 00 10 0 4 0 00
NAME Gifts and Holiday Cards TERMS 2/10, n/30

2013
Feb. 1 Balance ✔ 4 0 0 0 00
8 Invoice 2808, 2/5/13 P4 1 9 0 0 00 5 9 0 0 00
12 Invoice 2904, 2/8/13 P4 1 2 0 0 00 7 1 0 0 00
20 CM 102 J12 2 0 0 00 6 9 0 0 00
27 CM 118 J12 2 4 0 00 6 6 6 0 00
NAME Packing and Mail Supply Center TERMS 2/10, n/30

2013
Feb. 1 Balance ✔ 3 2 0 0 00
5 Invoice 502, 2/2/13 P4 2 1 0 0 00 5 3 0 0 00
NAME Specialty Business Cards TERMS 1/10, n/45

2013
Feb. 13 Invoice 2013, 2/9/13 P4 1 1 0 0 00 1 1 0 0 00
21 Invoice 1376, 2/19/13 P4 3 7 1 0 00 4 8 1 0 00
Simpson’s Card and Novelty Shop

February 28, 2013
Business Forms, Inc. 10 0 4 0 00
Gifts and Holiday Cards 6 6 6 0 00
Packing and Mailing Supply Center 5 3 0 0 00
Specialty Business Cards 4 8 1 0 00
Total 26 8 1 0 00
Analyze: Total freight charges for the month of February were $270. This
represents 2.24% ($270 ÷ $12,050) of delivered cost of purchases.
CRITICAL THINKING PROBLEM 8.1
ACCOUNTS
2013
Jan. 3 Fashion Expo 101 12/26 n/30 ✔ 4 6 2 0 00 4 5 0 0 00 1 2 0 00
5 Tru Totes & Co. 223 12/28 2/10, n/30 ✔ 3 5 6 9 00 3 4 8 0 00 8 9 00
7 Extreme Fashions 556 1/3 2/10, n/30 ✔ 3 0 7 5 00 3 0 0 0 00 7 5 00
9 Comfy Casuals 110 1/5 n/30 ✔ 2 3 6 0 00 2 3 6 0 00
12 Professional Wears 104 1/9 2/10, n/30 ✔ 6 5 5 0 00 6 4 0 0 00 1 5 0 00
18 City Walks 118 1/14 n/60 ✔ 3 2 0 0 00 3 1 2 0 00 8 0 00
25 Silky Legs Express 1012 1/20 2/10, n/30 ✔ 1 0 2 5 00 1 0 2 5 00
29 Comfy Casuals 315 1/26 n/30 ✔ 1 6 0 0 00 1 6 0 0 00
31 Special Occasions Dress Shop 1044 1/27 2/10, n/30 ✔ 7 7 5 0 00 7 5 0 0 00 2 5 0 00
31 33 7 4 9 00 32 9 8 5 00 7 6 4 00
( 2 0 5) ( 5 0 1) ( 5 0 2)
CRITICAL THINKING PROBLEM 8.1 (continued)
SALES JOURNAL PAGE 1
SALES ACCOUNTS SALES TAX

SLIP CUSTOMER'S POST. RECEIVABLE PAYABLE
DATE NO. NAME REF. DEBIT CREDIT SALES CREDIT
1 2013 1
2 Jan. 4 101 Vivian Cho ✔ 6 4 8 00 4 8 00 6 0 0 00 2
3 5 102 Dina Bates ✔ 5 6 7 00 4 2 00 5 2 5 00 3
4 6 103 Julia Adams ✔ 4 3 2 00 3 2 00 4 0 0 00 4
5 10 104 Cheryl Scott ✔ 3 7 8 00 2 8 00 3 5 0 00 5
6 14 105 Aileen De Revere ✔ 5 4 0 00 4 0 00 5 0 0 00 6
7 17 106 Sasha Ramirez ✔ 6 7 5 00 5 0 00 6 2 5 00 7
8 21 107 Elaine Patterson ✔ 1 6 2 0 00 1 2 0 00 1 5 0 0 00 8
9 24 108 Andrea Aguilar ✔ 5 4 0 00 4 0 00 5 0 0 00 9
10 25 109 Tracy Mai ✔ 3 2 4 00 2 4 00 3 0 0 00 10
11 29 110 Toni Garcia ✔ 6 4 8 00 4 8 00 6 0 0 00 11
12 31 111 Linda Martin ✔ 1 0 2 6 00 7 6 00 9 5 0 00 12
13 31 Totals 7 3 9 8 00 5 4 8 00 6 8 5 0 00 13
14 ( 1 1 1) ( 2 3 1) ( 4 0 1) 14
15 15
NAME City Walks TERMS n/60
POST.
2013
Jan. 18 Invoice 118, 1/14/13 P6 3 2 0 0 00 3 2 0 0 00
NAME Comfy Casuals TERMS n/30
POST.
2013
Jan. 9 Invoice 110, 1/5/13 P6 2 3 6 0 00 2 3 6 0 00
29 Invoice 315, 1/26/13 P6 1 6 0 0 00 3 9 6 0 00
NAME Extreme Fashions TERMS 2/10, n/30
POST.
2013
Jan. 7 Invoice 556, 1/3/13 P6 3 0 7 5 00 3 0 7 5 00
NAME Fashion Expo TERMS n/30
POST.
2013
Jan. 3 Invoice 101, 12/26/12 P6 4 6 2 0 00 4 6 2 0 00
NAME Professional Wears TERMS 2/10, n/30
POST.
2013
Jan. 12 Invoice 104, 1/9/13 P6 6 5 5 0 00 6 5 5 0 00
NAME Silky Legs Express TERMS 2/10, n/30
POST.
2013
Jan. 25 Invoice 1012, 1/20/13 P6 1 0 2 5 00 1 0 2 5 00
NAME Special Occasions Dress Shop TERMS 2/10, n/30
POST.
2013
Jan. 31 Invoice 1044, 1/27/13 P6 7 7 5 0 00 7 7 5 0 00
NAME Tru Totes & Co. TERMS 2/10, n/30
POST.
2013
Jan. 5 Invoice 223, 12/28/12 P6 3 5 6 9 00 3 5 6 9 00
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME Julia Adams TERMS n/30
POST.
2013
Jan. 6 Sales Slip 103 S1 4 3 2 00 4 3 2 00
NAME Andrea Aguilar TERMS n/30
POST.
2013
Jan. 24 Sales Slip 108 S1 5 4 0 00 5 4 0 00
NAME Dina Bates TERMS n/30
POST.
2013
Jan. 5 Sales Slip 102 S1 5 6 7 00 5 6 7 00
NAME Vivian Cho TERMS n/30
POST.
2013
Jan. 4 Sales Slip 101 S1 6 4 8 00 6 4 8 00
NAME Aileen De Revere TERMS n/30
POST.
2013
Jan. 14 Sales Slip 105 S1 5 4 0 00 5 4 0 00
NAME Toni Garcia TERMS n/30
POST.
2013
Jan. 29 Sales Slip 110 S1 6 4 8 00 6 4 8 00
NAME Tracy Mai TERMS n/30
POST.
2013
Jan. 25 Sales Slip 109 S1 3 2 4 00 3 2 4 00
NAME Linda Martin TERMS n/30
POST.
2013
Jan. 31 Sales Slip 111 S1 1 0 2 6 00 1 0 2 6 00
NAME Elaine Patterson TERMS n/30
DATE DESCRIPTION POST. REF. DEBIT CREDIT BALANCE

2013
Jan. 21 Sales Slip 107 S1 1 6 2 0 00 1 6 2 0 00
NAME Sasha Ramirez TERMS n/30

2013
Jan. 17 Sales Slip 106 S1 6 7 5 00 6 7 5 00
NAME Cheryl Scott TERMS n/30

2013
Jan. 10 Sales Slip 104 S1 3 7 8 00 3 7 8 00
GENERAL LEDGER
ACCOUNT Accounts Receivable ACCOUNT NO. 111
POST. BALANCE
2013
Jan. 31 S1 7 3 9 8 00 7 3 9 8 00
POST. BALANCE
2013
Jan. 31 P6 33 7 4 9 00 33 7 4 9 00
ACCOUNT Sales Tax Payable ACCOUNT NO. 231
POST. BALANCE
2013
Jan. 31 S1 5 4 8 00 5 4 8 00
GENERAL LEDGER
ACCOUNT Sales ACCOUNT NO. 401
POST. BALANCE
2013
Jan. 31 S1 6 8 5 0 00 6 8 5 0 00
POST. BALANCE
2013
Jan. 31 P6 32 9 8 5 00 32 9 8 5 00
POST. BALANCE
2013
Jan. 31 P6 7 6 4 00 7 6 4 00
Fashion Standards
January 31, 2013
City Walks 3 2 0 0 00
Comfy Casuals 3 9 6 0 00
Extreme Fashions 3 0 7 5 00
Fashion Expo 4 6 2 0 00
Professional Wears 6 5 5 0 00
Silky Legs Express 1 0 2 5 00
Special Occasions Dress Shop 7 7 5 0 00
Tru Totes & Co. 3 5 6 9 00
Total 33 7 4 9 00
Fashion Standards
Schedule of Accounts Receivable
January 31, 2013
Julia Adams 4 3 2 00
Andrea Aguilar 5 4 0 00
Dina Bates 5 6 7 00
Vivian Cho 6 4 8 00
Aileen De Revere 5 4 0 00
Toni Garcia 6 4 8 00
Tracy Mai 3 2 4 00
Linda Martin 1 0 2 6 00
Elaine Patterson 1 6 2 0 00
Sasha Ramirez 6 7 5 00
Cheryl Scott 3 7 8 00
Total 7 3 9 8 00
Analyze: Net delivered cost of purchases:

Purchases $32,985
Freight In 764
CRITICAL THINKING PROBLEM 8.2
1. To determine whether Passions Linen Shop was billed in error:

a Review Passions Linen Shop’s purchase order file for duplicate orders to Sensuous Linen
Company. If two orders were placed for the same merchandise, check the receiving reports
to determine if both shipments were received. If Passions Linen Shop does not prenumber
its purchase orders, two orders may have been issued for the same merchandise. If only,
one purchase order was placed, check the receiving reports for a duplicate shipment.
b If no duplicate purchase order or duplicate receipt of merchandise is found, ask Sensuous
Linen Company to identify why they made two shipments of sheets. If Sensuous Linen
Company made the second shipment in error, they will be obligated to accept return of the
sheets.
2. To prevent this situation from occurring again:

a Prenumber all purchase order forms and periodically check to be sure that all forms can be
accounted for.
b Require all purchase orders to have proper authorization before they are issued. Alexander
can authorize all purchase orders, or she can designate appropriate personnel to handle this
function.
c Require all shipments of merchandise received by the shop to be compared to the
corresponding purchase order and the invoice received from the supplier. Any shipment
for which there is no purchase order should be questioned immediately.
d Require the purchase order and corresponding receiving report to be attached to the invoice
before it is presented for payment.
Alexander can establish internal control procedures to reduce the possibility of issuing duplicate
purchase orders, but she cannot prevent suppliers from making duplicate shipments in error.
If the appropriate documentation accompanies invoices, though, she will know that the error is
not Passions Linen Shop’s.
SOLUTIONS TO BUSINESS CONNECTIONS
Managerial Focus:
1. Maintenance of good credit reputation, taking advantage of cash discounts.
2. Allows a business to buy on credit, using resources more effectively.
3. It is important to establish a good credit rating for future cash needs. Additionally, cash could
be used for other purposes.
4. Protect against fraud and excessive investment in merchandise.
5. Ensures authorized-only purchases, verifies receipt of goods and accuracy of invoices,
distributes tasks.
6. Creates a storage problem, risks obsolescence of the merchandise, and ties up funds.
Ethical Dilemma:
Anait’s actions are not ethical. If she cannot get a raise from this company, she should find a
new job. When she performs the unethical action of getting money from a fictitious vendor
she is stealing dollar for dollar from her company. Her money comes right out of net income
for this company.
When Anait finds how easy it is to perpetrate this fraud, she will create more vendors and
more invoices. To prevent these actions the controller should require each new vendor to
receive his/her approval. The procedure to only view the checks over $100 can still be
maintained with this one approval process.
Financial Statement Analysis:

1. 2010: 66.1%. 2009: 66.3%
2. Answers will vary. Students may suggest price changes on merchandise from suppliers,
discounts, or shipping costs variances.
Analyze Online:
Answers will vary depending on the year.
Teamwork:
The most advantageous would be net 45 days to pay the vendors, with customers on terms of
2/10 net 30. Your customers would then be paying you before you need to pay vendors.
Internet Connection:
Your Company address and phone number and the vendor’s name and address. The amount
of the check or purchase order. Reference for the purchase order number of purchase
requisition.
SOLUTIONS TO PRACTICE TEST
Part A True-False
1. FALSE 11. TRUE
2. TRUE 12. FALSE
3. TRUE 13. TRUE
4. TRUE 14. FALSE
5. TRUE 15. FALSE
6. TRUE 16. TRUE
7. FALSE 17. TRUE
8. TRUE 18. FALSE
9. TRUE 19. TRUE
10. TRUE 20. FALSE
Part B Exercises
1. An expense.
2. Accounts Payable Credit = Purchases Debit + Freight In Debit.
3. All columns.
4. It is not recorded in the purchases journal at all; it is entered in the cash payments journal.
5. The Accounts Payable column.
6. The General Journal.
7. In the Cost of Goods Sold section.

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Managerial Implications: Thinking Critically

1. Purchases journal 4. Purchases journal

Dr. Cr. Dr. Cr.

PURCHASES JOURNAL PAGE

GENERAL JOURNAL PAGE

GENERAL JOURNAL PAGE

PURCHASES JOURNAL PAGE 14

GENERAL JOURNAL PAGE 38

ACCOUNT Purchases ACCOUNT NO. 501

ACCOUNT Freight In ACCOUNT NO. 502

ACCOUNT Purchases Returns and Allowances ACCOUNT NO. 503

Analyze: Total purchases in June were $9,656.

ACCOUNTS PAYABLE SUBSIDIARY LEDGER

NAME Hi-Qual Case TERMS n/45

NAME Holtz Spectrum TERMS 2/10, n/30

NAME Nano Glass TERMS 1/10, n/60

NAME Photo Supplies TERMS n/45

NAME Pro Photo Equipment TERMS n/60

Qwik Photo Club

Analyze: The balance owed to Nano Glass on June 30 is $3,130.

PURCHASES JOURNAL PAGE 8

GENERAL JOURNAL PAGE 20

ACCOUNT Accounts Payable ACCOUNT NO. 205

ACCOUNT Purchases ACCOUNT NO. 501

ACCOUNT Freight In ACCOUNT NO. 502

ACCOUNT Purchases Returns and Allowances ACCOUNT NO. 503

ACCOUNTS PAYABLE SUBSIDIARY LEDGER

NAME Brooks Garden Furniture Company TERMS n/45

NAME Brown Corporation TERMS n/60

NAME Cameron Rubber Company TERMS 1/15, n/60

NAME Lawn & Gardens Supply TERMS n/30

NAME Wilson Industrial Products TERMS 2/10, n/30

The English Garden Shop

Brooks Garden Furniture Company 15 4 4 2 00

GENERAL JOURNAL PAGE 14

ACCOUNT Accounts Payable ACCOUNT NO. 205

ACCOUNT Purchases ACCOUNT NO. 501

ACCOUNT Freight In ACCOUNT NO. 502

ACCOUNT Purchases Returns and Allowances ACCOUNT NO. 503

ACCOUNTS PAYABLE SUBSIDIARY LEDGER

NAME Apex Office Machines, Inc. TERMS n/60

NAME Brown Paper Company TERMS 1/10, n/30

NAME Dalton Office Furniture Company TERMS n/30

NAME Davis Corporation TERMS n/30

NAME Zenn Furniture, Inc. TERMS 2/10, n/30

Professional Office Products Center

PURCHASES JOURNAL PAGE 15

GENERAL JOURNAL PAGE 38

ACCOUNT Accounts Payable ACCOUNT NO. 205