Problem 7 Ferrara Company Completes These Transactions

Problem 7 5ferrara Company Completes These Transactions And Events Dur

Ferrara Company completes these transactions and events during March of the current year (terms of all credit sales are 2/10, n/30): Received merchandise and an invoice dated March 1, terms 1/15, n/30, from Jerry Corp. Sold merchandise on credit to N. Newman, Invoice No., for (cost is). Purchased office supplies on credit from Elaine Company, invoice dated March 3, terms n/10 EOM. Sold merchandise on credit to D. George, Invoice No., for (cost is). Purchased office equipment on credit from Susan Supply, invoice dated March 9, terms n/10 EOM. Sold merchandise on credit to Kramer Co, Invoice No., for (cost is). Borrowed cash by giving Big Bank a long-term note payable. Received payment from N. Newman for the March 2 sale less the discount. Sent Jerry Corp Check No. in payment of the March 1 invoice less the discount. Received payment from D. George for the March 3 sale less the discount. Received merchandise and an invoice dated March 13, terms 3/10, n/30, from AJ Jack Corp.

Cash sales for the first half of the month are (cost is). (Cash sales are recorded daily, but are recorded only twice here to reduce repetitive entries.) Issued Check No. , payable to Payroll, in payment of sales salaries for the first half of the month, . Cashed the check and paid the employees. Received a credit memorandum from AJ Jack Corp for unsatisfactory merchandise received on March 14 and returned for credit. Purchased store supplies on credit from Elaine Company, invoice dated March 16, terms n/10 EOM. Received a credit memorandum from Susan Supply for office equipment received on March 9 and returned for credit. Received payment from Kramer Co. for the sale of March 10 less the discount. Issued Check No. to AJ Jack Corp in payment of the invoice of March 14 less the return and the discount. Sold merchandise on credit to Kramer Co, Invoice No., for (cost is). Cash sales for the last half of the month are (cost is). Issued Check No. , payable to Payroll, in payment of sales salaries for the last half of the month. Cashed the check and paid the employees. Verify that amounts impacting customer and creditor accounts were posted, and that any amounts that should have been posted as individual amounts to the general ledger accounts were posted. Foot and crossfoot the journals and make the month-end postings.

Paper For Above instruction

This comprehensive accounting task involves recording, posting, and reconciling a series of complex transactions undertaken by Ferrara Company during March. The accounting cycle includes journalizing transactions, posting to ledger accounts, preparing financial statements, and verifying the accuracy of records through trial balances and subsidiary ledgers. The process begins with recording credit sales, cash sales, purchases, and payments, followed by adjustments for discounts, returns, and credits. Special attention must be given to the proper handling of trade discounts, credit memos, and returns to ensure accurate recording of receivables and payables. The creation of detailed journal entries in sales, purchases, cash receipts, cash disbursements, and general journals lays the foundation for balanced ledger accounts. Subsequently, preparing the general ledger, subsidiary ledgers, and trial balance is necessary to confirm the correctness of entries. An emphasis on internal control, accuracy, and adherence to accounting principles is crucial throughout, especially in reconciling subsidiary accounts with the general ledger. This process not only aids in financial reporting but also ensures the reliability of the company's financial statements at month-end.

The following detailed steps outline the essential processes:

1. Recording transactions

• Journalize all sales, purchases, cash receipts, and cash payments in their respective journals, including sales journal, purchases journal, cash receipts journal, and cash disbursements journal.
• Make entries for credit sales, considering any applicable discounts if paid within the discount period.
• Record cash sales immediately, ensuring accurate recording of cash received.
• Record purchases and payments, adjusting for returns and discounts when applicable.

2. Posting to ledger accounts

• Open and update all general ledger accounts, including Cash, Accounts Receivable, Inventory, Office Supplies, Store Supplies, Office Equipment, Accounts Payable, Long-Term Notes Payable, W. Ferrara Capital, Sales, Sales Discounts, Cost of Goods Sold, and Sales Salaries Expense.
• Open subsidiary ledger accounts for customer accounts (D. George, N. Newman, Kramer Co.) and creditor accounts (Jerry Corp, Elaine Company, Susan Supply, AJ Jack Corp.).
• Post all transactions accurately, ensuring debits and credits align correctly.

3. Adjustments and reconciliations

• Make adjusting entries for merchandise returns, credit memos, and discounts.
• Verify that accounts receivable and accounts payable subsidiary ledgers are subsidiary to their respective control accounts.
• Prepare trial balance by summing debits and credits, ensuring totals match.

4. Financial statement preparation

• Prepare schedules of accounts receivable and accounts payable to confirm subsidiary ledger balances.
• Create income statement components: Sales, Cost of Goods Sold, Gross Profit, Operating Expenses including Sales Salaries Expense, and Net Income.
• Prepare a balance sheet reflecting assets, liabilities, and equity as of March 31.

5. Internal control and review

• Review all postings for accuracy and completeness.
• Cross-foot journals and verify trial balance totals.
• Confirm that all transactions are properly reflected in financial reports for period end.

Implementing this detailed process ensures an accurate reflection of Ferrara Company's financial position at the end of March, facilitates internal control, and adheres to professional accounting standards.

References

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• The American Institute of CPAs (AICPA). (2022). Generally Accepted Auditing Standards (GAAS).
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