Question
It is April 1, 2015, the first business day of the month, and you have just been hired as the accountant for Allarco Inc., which
It is April 1, 2015, the first business day of the month, and you have just been hired as the accountant for Allarco Inc., which operates with monthly accounting periods. For simplicity, ignore all sales tax considerations and assume that Allarco Inc. sells one product. All of the company's accounting work has been completed through the end of March, 2015. Allarco Inc.'s year end is April 30. The post-closing alphabetized trial balance at March 31, 2015 follows.
Allarco Inc.
Post-Closing Trial Balance
March 31, 2015
Debit
Credit
Accounts receivable1
162,000
Accounts payable2
459,000
Accumulated depreciation, store equipment
61,532
Allowance for doubtful accounts
16,200
Cash
1,146,547
Common shares3
70,000
Interest receivable4
244
Merchandise inventory5
1,200,000
Notes receivable4
65,000
Prepaid insurance6
20,500
Retained earnings
2,072,309
Store equipment7
105,750
Utilities payable
21,000
Totals
2,700,041
2,700,041
1See the Accounts Receivable Subledger below for details regarding customer balances.
2See the Accounts Payable Subledger below for details regarding creditor balances.
3There are an unlimited number of shares authorized with 20,000 shares issued and outstanding as at March 31, 2015.
4This is a 9% note due March 15, 2018 with interest collectible on the 15th of each month. Refer to the collection schedule below for the note details. Values in schedule have been rounded for convenience.
5See the Merchandise Inventory Subledger below for details of inventory holdings.
6The balance in Prepaid Insurance represents payment for 4 months starting April 1, 2015.
7See the Property, Plant and Equipment Subledger below for detailed information.
You have determined that Allarco Inc. uses the moving weighted average cost flow assumption under a perpetual system to account for merchandise inventory and that the terms of all credit sales are 2/10, n/30. Merchandise sells for $213 per unit.
The following source documents are from April :
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