Palisade Creek Co$.$ is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co$.$ as of May $1,20$Y$7($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 Depreciation$$Store Equipment $56,700$

$210$ Accounts Payable $96,600$

$211$ Customer Refunds Payable $50,000$

$212$ Salaries Payable $$

$310$ Lynn Tolley, Capital, June $1,20$Y$6685,300$

$311$ 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

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.

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.

Prepare an unadjusted trial balance.

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 $314,000$

d$.$ Depreciation for the current year $14,000$

e$.$ Accrued salaries on May $31$:

Sales salaries $$7,000$

Office salaries $6,60013,600$

f$.$ The adjustment for customer refunds and allowances is $$60,000.$

$($Optional$)$ Enter the unadjusted trial balance on a $10-$column end$-$of$-$period spreadsheet $($work sheet$),$ and complete the spreadsheet.

Journalize and post the adjusting entries. Record the adjusting entries on Page $22$ of the journal.

Prepare an adjusted trial balance.

Prepare an income statement, a statement of owner$$s equity, and a balance sheet.

Answer

Check Figure: Net income: $$706,855$

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 owner$$s capital account.

Prepare a post$-$closing trial balance.