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 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, 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:

Record the following transactions on page 20 of the journal.

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.

Required:

1. Download the spreadsheet in the Ledger panel and save the Excel file to your computer. Use the spreadsheet to post the May transactions from the journal to a ledger of four-column accounts. Be sure to save your work in Excel as it will be used to complete the following steps in Part 1 of this problem as well as steps in Part 2 of this problem. Your input into the spreadsheet will not be included in your grade in CengageNOW on this problem.

A. Enter the May 1 balances of each of the accounts in the appropriate balance column of a four-column account. Enter May 1 in the date column. Write Balance in the item section, and enter X in the Posting Reference column.

B. 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. Add the appropriate posting reference to the journal.

3. Prepare an unadjusted trial balance. Accounts with zero balances can be left blank.

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, $585,200

Insurance expired during the year, $12,000

Store supplies on hand on May 31, $4,000

Depreciation for the current year, $14,000

Accrued salaries on May 31:

Sales salaries, $7,000

Office salaries, $6,600

Total accrued salaries: $13,600

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

5. (Optional) On your own paper or spreadsheet, enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work sheet), and complete the spreadsheet. Find a blank end-of-period work sheet in the Excel spreadsheet you previously downloaded.

6.

A. Journalize the adjusting entries. Record the adjusting entries on Page 22 of the journal.*

B. Post the adjusting entries. Add the appropriate posting reference to the journal.

7. Prepare an adjusted trial balance. Accounts with zero balances can be left blank.

*Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

X

Chart of Accounts

CHART OF ACCOUNTS

Palisade Creek Co.

General Ledger

ASSETS

110 Cash

112 Accounts Receivable

115 Merchandise Inventory

117 Prepaid Insurance

118 Store Supplies

123 Store Equipment

124 Accumulated Depreciation-Store Equipment

LIABILITIES

210 Accounts Payable

211 Customer Refunds Payable

212 Salaries Payable

EQUITY

310 Lynn Tolley, Capital

311 Lynn Tolley, Drawing

REVENUE

410 Sales

EXPENSES

510 Cost of Merchandise Sold

520 Sales Salaries Expense

521 Advertising Expense

522 Depreciation Expense

523 Store Supplies Expense

529 Miscellaneous Selling Expense

530 Office Salaries Expense

531 Rent Expense

532 Insurance Expense

539 Miscellaneous Administrative Expense

X

Journal

Shaded cells have feedback.

1. B. Journalize the transactions for May, starting on Page 20 of the journal.*

2. Add the appropriate posting reference to the journal.

6. A. Journalize the adjusting entries. Record the adjusting entries on Page 22 of the journal.*

6. B. Add the appropriate posting reference to the journal.

*Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

Note: Scroll down for pages 21 and 22 of the journal.

All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback.

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JOURNALACCOUNTING EQUATION

Score: 20/379

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5.17 / 98

Feedback

Check My Work

1. B. Apply the rules of debit and credit of double-entry accounting to record the various transitions in the general journal. Recall that expenses are increased by a debit and revenues are increased by a credit. Under a perpetual inventory system, all transactions affecting items purchased for resale are recorded in the Merchandise Inventory account. Therefore, the merchandise inventory account is continually updated for purchases and sales transactions. As a result, the balance of the merchandise inventory account is the amount of merchandise available for sale at that point in time. In addition, a separate account is used to record the cost of merchandise sold.

Question not attempted.

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JOURNALACCOUNTING EQUATION

Score: 0/365

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Points:

0 / 94

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Check My Work

2. The posting reference column is left blank when the journal entry is initially recorded. This column is used later when the journal entry amounts are transferred to the accounts in the ledger. Once the transaction is posted, the general ledger account number assigned to the account is entered in the posting reference of the general journal.

Question not attempted.

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JOURNALACCOUNTING EQUATION

Score: 0/176

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Points:

0 / 45

Feedback

Check My Work

6. A. The journal entries that bring the accounts up to date at the end of the accounting period are called adjusting entries. All adjusting entries affect at least one income statement account and one balance sheet account. Thus, an adjusting entry will always involve a revenue or an expense account and an asset or a liability account. The four basic types of accounts require adjusting entries are (1) Prepaid expenses, (2) Unearned revenues, (3) Accrued revenues and (4) Accrued expenses. Recall for a merchandising business using the perpetual inventory system additional accounts require adjustment. These include merchandise inventory to adjust for any shrinkage, as well as adjustments for customer returns and allowances which will affect sales and the cost of goods sold. The following accounts require an adjustment as of May 31: merchandise inventory, prepaid insurance, store supplies, depreciation expense, salary expense, customer refunds payable and estimated returns inventory.

6. B. The posting reference column is left blank when the journal entry is initially recorded. This column is used later when the journal entry amounts are transferred to the accounts in the ledger. Once the transaction is posted, the general ledger account number assigned to the account is entered in the posting reference of the general journal.

X

Ledger

1. Download the attached SPREADSHEET and save the Excel file to your computer. Use the spreadsheet to post the May transactions from the journal to a ledger of four-column accounts. Be sure to save your work in Excel as it will be used to complete the following steps in Part 1 of this problem as well as steps in Part 2 of this problem. Your input into the spreadsheet will not be included in your grade in CengageNOW on this problem.

A. Enter the May 1 balances of each of the accounts in the appropriate balance column of a four-column account. Enter May 1 in the date column. Write Balance in the item section, and enter X in the Posting Reference column.

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.

6. B. Post the adjusting entries.