Texas Tea Exploration Co. was established on March 15, 2008, to provide oil-drilling services

Texas Tea Exploration Co. was established on March 15, 2008, to provide oil-drilling services. Texas Tea 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 March are as follows:

Mar.

16

Issued Check No. 1 in payment of rent for the remainder of March, $4,800.  

16

Purchased field equipment on account from PMI Sales Inc., $28,500.  

17

Purchased field supplies on account from Culver Supply Co., $8,740.  

18

Issued Check No. 2 in payment of field supplies, $2,150, and office supplies, $390.  

20

Purchased office supplies on account from Castle Office Supply Co., $1,060.  

24

Issued Check No. 3 to PMI Sales Inc., in payment of March 16 invoice.  

26

Issued Check No. 4 to Culver Supply Co. in payment of March 17 invoice.  

28

Issued Check No. 5 to purchase land, $165,000.  

28

Purchased office supplies on account from Castle Office Supply Co., $2,570.  

30

Purchased the following from PMI Sales Inc. on account: field supplies, $21,380,    

and office equipment, $12,200.  

30

Issued Check No. 6 to Castle Office Supply Co. in payment of March 20 invoice.  

30

Purchased field supplies on account from Culver Supply Co., $11,100.  

31

Issued Check No. 7 in payment of salaries, $24,500.  

31

Rented building for one year in exchange for field equipment having a cost of    

$12,400.

Instructions

1. Journalize the transactions for March. Use a purchases journal and a cash payments journal, similar to those illustrated in this chapter, and a two-column general journal. Set debit columns for Field Supplies, Office Supplies, and Other Accounts in the purchases journal. Refer to the following partial chart of accounts:

11

Cash

18

Office Equipment

14

Field Supplies

19

Land

15

Office Supplies

21

Accounts Payable

16

Prepaid Rent

61

Salary Expense

17

Field Equipment

71

Rent Expense

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

Castle Office Supply Co.

Culver Supply Co.

PMI Sales Inc.

2. Post the individual entries (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 ledger. (Because the problem does not include transactions related to cash receipts, the cash account in the ledger will have a credit balance.)

4. Prepare a supplier balance summary report.

 

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