Reference no: EM131213316

Wise Company completes these transactions during April of the current year (the terms of all its credit sales are 2y10, ny30).

Apr. 2 Purchased $13,300 of merchandise on credit from Negi Company, invoice dated April 2, terms 2y10, ny60.
3 Sold merchandise on credit to Brooke Sledd, Invoice No. 760, for $3,000 (cost is $2,000).
3 Purchased $1,380 of office supplies on credit from Madison, Inc. Invoice dated April 2, terms ny10 EOM.
4 Issued Check No. 587 to U.S. View for advertising expense, $999.
5 Sold merchandise on credit to Paul Kohr, Invoice No. 761, for $8,000 (cost is $6,500).
6 Received an $85 credit memorandum from Madison, Inc., for the return of some of the office supplies received on April 3.
9 Purchased $11,125 of store equipment on credit from Ned's Supply, invoice dated April 9, terms ny10 EOM.
11 Sold merchandise on credit to Amy Nilson, Invoice No 762, for $9,500 (cost is $7,000).
12 Issued Check No. 588 to Negi Company in payment of its April 2 invoice, less the discount.
13 Received payment from Brooke Sledd for the April 3 sale, less the discount.
13 Sold $4,100 of merchandise on credit to Brooke Sledd (cost is $2,600), Invoice No. 763.
14 Received payment from Paul Kohr for the April 5 sale, less the discount.
16 Issued Check No. 589, payable to Payroll, in payment of sales salaries expense for the first half of the month, $9,750. Cashed the check and paid employees.
16 Cash sales for the first half of the month are $50,840 (cost is $33,880). (Cash sales are recorded daily from cash register data but are recorded only twice in this problem to reduce repetitive entries.)
17 Purchased $12,750 of merchandise on credit from Price Company, invoice dated April 17, terms 2y10, ny30.
18 Borrowed $50,000 cash from First State Bank by signing a long-term note payable.
20 Received payment from Amy Nilson for the April 11 sale, less the discount.
20 Purchased $730 of store supplies on credit from Ned's Supply, invoice dated April 19, terms ny10 EOM.
23 Received a $400 credit memorandum from Price Company for the return of defective merchandise received on April 17.
23 Received payment from Brooke Sledd for the April 13 sale, less the discount.
25 Purchased $10,375 of merchandise on credit from Negi Company, invoice dated April 24, terms 2y10, ny60.
26 Issued Check No. 590 to Price Company in payment of its April 17 invoice, less the return and the discount.
27 Sold $3,070 of merchandise on credit to Paul Kohr, Invoice No. 764 (cost is $2,420).
27 Sold $5,700 of merchandise on credit to Amy Nilson, Invoice No. 765 (cost is $3,305).
30 Issued Check No. 591, payable to Payroll, in payment of the sales salaries expense for the last half of the month, $9,750.
30 Cash sales for the last half of the month are $70,975 (cost is $55,900).

Required

1. Prepare a sales journal and a cash receipts journal. Then review the transactions of Wise Company and enter those that should be journalized in the sales journal and those that should be journalized in the cash receipts journal. Ignore any transactions that should be journalized in a purchases journal, a cash disbursements journal, or a general journal.

2. Open the following general ledger accounts: Cash, Accounts Receivable, Inventory, Long-Term Notes Payable, B. Wise, Capital, Sales, Sales Discounts, and Cost of Goods Sold. Enter the March 31 balances for Cash ($85,000), Inventory ($125,000), Long-Term Notes Payable ($110,000), and B. Wise, Capital ($100,000). Also open accounts receivable subsidiary ledger accounts for Paul Kohr, Brooke Sledd, and Amy Nilson.

3. Verify that amounts that should be posted as individual amounts from the journals have been posted. (Such items are immediately posted.) Foot and crossfoot the journals and make the month-end postings.

4. Prepare a trial balance of the general ledger and prove the accuracy of the subsidiary ledger by preparing a schedule of accounts receivable.

Analysis Component

5. Assume that the total for the schedule of Accounts Receivable does not equal the balance of the controlling account in the general ledger. Describe steps you would take to discover the error(s).