Lasting Summer Inc. has $2,510 in the October 1 balance of the accounts receivable account consisting of $1,060 from Champion Co. and $1,450 from Wayfarer Co. Transactions related to revenue and cash receipts completed by Lasting Summer Inc. during the month of October 20Y5 are as follows:
Oct.
3. Issued Invoice No. 622 for services provided to Palace Corp., $2,890.
5. Received cash from Champion Co., on account, for $1,060.
8. Issued Invoice No. 623 for services provided to Sunny Style Inc., $1,940.
12. Received cash from Wayfarer Co., on account, for $1,450.
18. Issued Invoice No. 624 for services provided to Amex Services Inc., $2,970.
23. Received cash from Palace Corp. for Invoice No. 622 of October 3.
28. Issued Invoice No. 625 to Wayfarer Co., on account, for $900.
30. Received cash from Rogers Co. for services provided, $120.
a. Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted.
b. Prepare a listing of the accounts receivable customer balances and verify that the total of the accounts receivable customer balances equals the balance of the accounts receivable controlling account on October 31, 20Y5.
c. Why does Lasting Summer Inc. use a subsidiary ledger for accounts receivable?
Answer:
a.
20Y5
Oct. 3 622 Palace Corp.
8 623 Sunny Style Inc.
18 624 Amex Services Inc.
28 625 Wayfarer Co.
31
20Y5
Oct. 5 Champion Co.1,060
12 Wayfarer Co.1,450
23 Palace Corp.2,890
30 Fees Earned120
315,520
b.
Amex Services Inc.$2,970
Sunny Style Inc.1,940
Wayfarer Co.900
Total accounts receivable$5,810
The total of the customer accounts on October 31, 20Y5, $5,810, equals the
balance of the accounts receivable controlling account, shown as follows:
Oct. 1 Bal. Oct. 31
31
31 Bal.
8,700
5,810
c. The accounts receivable subsidiary ledger is needed to track customer services
provided on account and customer collections. Without the subsidiary ledger,
Lasting Summer Inc. would not know who owes how much for
services rendered. Furthermore, without the subsidiary ledger, it would be
impossible to manage collections from individual customers.