Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 20Y7


Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 20Y7 (unless otherwise indicated), are as follows:

110 Cash $ 83,600
112 Accounts Receivable 233,900
115 Merchandise Inventory 652,400
117 Prepaid Insurance 16,800
118 Store Supplies 11,400
123 Store Equipment 569,500
124 Accumulated DepreciationStore Equipment 56,700
210 Accounts Payable 96,600
211 Customer Refunds Payable 50,000
212 Salaries Payable
310 Lynn Tolley, Capital, June 1, 20Y6 685,300
311 Lynn Tolley, Drawing 135,000
410 Sales 5,069,000
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, n/30, FOB shipping point, $36,000.
4. Paid freight on purchase of May 3, $600.
6. Sold merchandise on account to Korman Co., terms 2/10, n/30, FOB 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, $54,000. 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. Paid $33,450 to Buttons Co. on account.
20. Paid Korman Co. a cash refund of $5,000 for damaged merchandise from sale of May 6. Korman Co. kept the merchandise.

Record the following transactions on Page 21 of the journal:

May 20. Sold merchandise on account to Crescent Co., terms 1/10, n/30, FOB shipping point, $110,000. The cost of the merchandise sold was $70,000.
21. For the convenience of Crescent Co., paid freight on sale of May 20, $2,300.
21. Received $42,900 cash from Gee Co. on account.
21. Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB destination, $88,000.
24. Returned damaged merchandise purchased on May 21, receiving a credit memo from the seller for $5,000.
26. Refunded cash on sales made for cash, $800. The defective merchandise was not returned by the customer.
28. Paid 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, n/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 column and place a check mark () in the Posting Reference column. Journalize the transactions for May, starting on Page 20 of the journal.

  2. Post the journal to the general ledger, extending the month-end balances to the appropriate 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).

    a. Merchandise inventory on May 31 $585,200
    b. Insurance expired during the year 12,000
    c. Store supplies on hand on May 31 4,000
    d. Depreciation for the current year 14,000
    e. Accrued salaries on May 31:
    Sales salaries $7,000
    Office salaries 6,600 13,600
    f. The adjustment for customer refunds and allowances is $60,000.
  5. (Optional) Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work sheet), and complete the spreadsheet.

  6. Journalize 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 owners equity, and a balance sheet.

    Answer

    Check Figure: Net income: $706,855

  9. Prepare and post the closing entries. Record the closing entries on Page 23 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. Insert the new balance in the owners capital account.

  10. Prepare a post-closing trial balance.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

The question is quite comprehensive and involves various accounting procedures for a merchandising business using a perpetual inventory system Lets break it down stepbystep to address the key componen... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial And Managerial Accounting

Authors: Carl S. Warren, Jefferson P. Jones, William B. Tayler

15th Edition

1337902667, 9781337902663

More Books

Students also viewed these Accounting questions

Question

=+d) Perform the ANOVA and report your conclusions.

Answered: 1 week ago