Purchases and Cash Payments Journals; Accounts Payable subsidiary and General Le

Question

Purchases and Cash Payments Journals; Accounts Payable subsidiary and General Ledgers

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:

Required:

1. Journalize the transactions (in chronological order as presented in the data) for October. Use a purchases journal and a cash payments journal, and a two-column general journal. Use debit columns for Field Supplies, Office Supplies, and Other Accounts in the purchases journal. Refer to the following partial chart of accounts:

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

2. Post the individual entries in chronological order (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 ledge in chronological order. However, if there is more than one entry on the same date, post from the purchases journal before posting from the cash payments journal.r.

If no other account is needed in the "Other Accounts Dr." column select "No Entry Required". For those boxes in which no entry is required, leave the box blank.

(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. All are reasons why West Texas might consider using a subsidiary ledger for the field equipment EXCEPT:

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. 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.

Explanation / Answer

FIELD SUPPLIES

POST

REF

DATE TRANSACTIONS & ACCOUNTS DEBIT CREDIT OCT 16 PREPAID RENT 7000 CASH/BANK 7000 OCT16 EQUIPMENT 32600 PETRO SERVICES INC. 32600 OCT 17 FIELD SUPPLIES 9780 MIDLAND SUPPLIES 9780 OCT 18 OFFICE SUPPLIES 650 FIELD SUPPLIES 4570 CASH 5220 OCT 20 OFFICE SUPPLIES 1320 A-ONE OFF. SUPPLIES CO. 1320 OCT 24 PETRO SERVICE INC. 32600 CASH 32600 OCT 26 MIDLAND SUPPLY CO. 9780 CASH 9780 OCT 28 LAND 240000 CASH 240000 OCT 28 OFFICE SUPPLIES 3670 A-ONE OFFICE SUPPLIES CO. 3670 OCT 30 FIELD SUPPLIES 25300 OFFICE SUPPLIES 5500 PETRO SERVICE INC. 30800 OCT 30 A-ONE OFFICE SUPPLIES CO. 1320 CASH 1320 OCT 30 FIELD SUPPLIES 12450 MIDLAND SUPPLY 12450 OCT 31 SALARIES 32000 CASH 32000 OCT 31 FIELD EQUIPMENT 15000 RENT FOR BUILDING 15000 OCT 31 RENT 7000 PREPAID RENT 7000

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