317 Chapter 6 Accounting for Merchandising Businesses Continuing Problem 8. Net Income $741,855 Palisade Creek Co. is a merchandising business that uses the perpetual Inventory system. The account balances for Pallade Creek Co, as of May 1, 2016 (unless otherwise indicated), are as follows: 110 Cash $ 1.600 112 233,900 Accounts Receivable 115 Merchandise Inventory 116 Estimated Retums Inventory 28,000 117 Prepaid Insurance 16,800 118 Store Supplies 11,400 123 Store Equipment 569,500 124 Accumulated Depreciation Store Equipment 56,700 210 Accounts Payable 96,600 211 Salaries Payable 212 Customers Refunds Payable 50,000 310 Lynn Toley, Capital. June 1, 2015 685,300 Lynn Tolley, Drawing 135.000 Income Summary 410 Sales 5,009,000 510 Cost of Merchandise Sold 2.823,000 520 Sales Salaries Expense 664.800 521 Advertising Expense 281,000 522 Depreciation Expense 523 Store Supplies Expense 529 Miscellaneous Selling Expense 12.600 530 Office Salaries Expense 382,100 531 Rent Expense 83,700 532 Insurance Expense 539 Miscellaneous Administrative Expense 7,800 During May, the last month of the fiscal year, the following transactions were completed: May 1. Paid rent for May, $5,000. 3. Purchased merchandise on account from Martin Co.,terms 2/10, 1/30, FOB shipping point, $36,000 4. Pald freight on purchase of May 3, 5600 6. Sold merchandise on account to Korman Co., terms 2/10, 1/30, POB shipping point, $68,500. The cost of the merchandise sold was $41,000. 7. Received $22,300 cash from Halstad Co. on account 10. Sold merchandise for cash, 554.000. The cost of the merchandise sold was $32,000 13. Paid for merchandise purchased on May 3. 15. Paid advertising expense for last half of May, $11,000 16. Received cash from sale of May 6. 19. Purchased merchandise for cash, $18,700. 19. Pald $33,450 to Buttons Co. on account 20. Pald Korman Co. & cash refund of $13,230 for returned merchandise from sale of May 6. The involce amount of the returned merchandise was $13,500 and the cost of the returned merchandise was $8,000. Mecord the followinnon pe 21 of the journal 20. Sold merchandise on account to Crescent Co, terus 1/10, 1/30, FOB shipping point, $110,000. The cost of the merchandise sold was $70,000. 21. For the convenience of Crescent Co., puid freight on sale of May 20, 52,300. 21. Received 142,900 cash from Gee Co, on account (Continued) 318 Chapter 6 Accounting for Merchandising Businesses May 21. Purchased merchandise on account from Osterman Co., terms 1/10,n/30, FOB destination, $88,000 24. Returned of damaged merchandise purchased on May 21, receiving a credit mento from the seller for $5,000. 26. Refunded cash on sales made for cash, $7.500. The cost of the merchandise returned was $4,800 28. Pald sales salaries of $56,000 and office salaries of $29.000 29. Purchased store supplies for cash, $2,400. 30. Sold merchandise on account to Turner Co., terms 2/10, 1/30, FOB shipping point, $78,750. The cost of the merchandise sold was $47,000 30. Received cash from sale of May 20 plus freight paid on May 21 31. Paid for purchase of May 21, less return of May 24 Instructions 1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark ( in the Posting Reference column. Journalize the transactions for July, starting on Page 20 of the journal 2. Post the journal to the general ledger, extending the month-end balances to the appropri ate balance columns after all posting is completed. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6). Merchandise inventory on May 31 $570,000 b. Insurance expired during the year 12.000 Store supplies on hand on May 31 d. Depreciation for the current year 14,000 e. Accrued salpries on May 31: Sales salaries 57.000 Office salaries 6.600 13.600 The adjustment for customer returns and allowance is $60,000 for sales and $35,000 for cont of merchandise sold 5. (Optional) Enter the unadjusted trial balance on a 10-column end of period spread. sheet (work sheet), and complete the spreadsheet. 6. Joumalize and post the adjusting entries. Record the adjusting entries on Page 22 of the journal 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a statement of owner's equity, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 25 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the owner's capital account 10. Prepare a post-closing trial balance