Palisade Creek Co. is a merchandising business. The account balances for Palisade Creek Co. as of May 1, 2016 (unless otherwise indicated), are as follows:

110	Cash	$83,600
112	Accounts Receivable	233,900
115	Merchandise Inventory	624,400
116	Estimated Returns Inventory	28,000
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	Salaries Payable
212	Customers Refunds Payable	50,000
310	Common Stock	100,000
311	Retained Earnings	585,300
312	Dividends	135,000
313	Income Summary
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

May 1: Paid rent for May, $5,000.

Description	Post. Ref.	Debit	Credit
Rent Expense
Cash

May 3: Purchased merchandise on account from Martin Co., terms 2/10, n/30, FOB shipping point, $36,000.

Description	Post. Ref.	Debit	Credit
Merchandise Inventory
Accounts Payable-Martin Co.

May 4: Paid freight on purchase of May 3, $600.

Description	Post. Ref.	Debit	Credit
Merchandise Inventory
Cash

May 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.

Description	Post. Ref.	Debit	Credit
Accounts Receivable-Korman Co.
Sales
Cost of Merchandise Sold
Merchandise Inventory

May 7: Received $22,300 cash from Halstad Co. on account.

Description	Post. Ref.	Debit	Credit
Cash
Accounts Receivable-Halstad Co.

May 10: Sold merchandise for cash, $54,000. The cost of the merchandise sold was $32,000.

Description	Post. Ref.	Debit	Credit
Cash
Sales
Cost of Merchandise Sold
Merchandise Inventory

May 13: Paid for merchandise purchased on May 3.

Description	Post. Ref.	Debit	Credit
Accounts Payable-Martin Co.
Cash

May 15: Paid advertising expense for last half of May, $11,000.

Description	Post. Ref.	Debit	Credit
Advertising Expense
Cash

May 16: Received cash from sale of May 6.

Description	Post. Ref.	Debit	Credit
Cash
Accounts Receivable-Korman Co.

May 19: Purchased merchandise for cash, $18,700.

Description	Post. Ref.	Debit	Credit
Merchandise Inventory
Cash

May 19: Paid $33,450 to Buttons Co. on account.

Description	Post. Ref.	Debit	Credit
Accounts Payable-Buttons Co.
Cash

May 20: Paid Korman Co. a cash refund of $13,230 for returned merchandise from sale of May 6. The invoice amount of the returned merchandise was $13,500 and the cost of the returned merchandise was $8,000.

Description	Post. Ref.	Debit	Credit
Customers Refunds Payable
Cash
Merchandise Inventory
Estimated Returns Inventory

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.

Description	Post. Ref.	Debit	Credit
Accounts Receivable-Crescent Co.
Sales
Cost of Merchandise Sold
Merchandise Inventory

May 21: For the convenience of Crescent Co., paid freight on sale of May 20, $2,300.

Description	Post. Ref.	Debit	Credit
Accounts Receivable-Crescent Co.
Cash

May 21: Received $42,900 cash from Gee Co. on account.

Description	Post. Ref.	Debit	Credit
Cash
Accounts Receivable-Gee Co.

May 21: Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB destination, $88,000.

Description	Post. Ref.	Debit	Credit
Merchandise Inventory
Accounts Payable-Osterman Co.

May 24: Returned damaged merchandise purchased on May 21, receiving a credit memo from the seller for $5,000.

Description	Post. Ref.	Debit	Credit
Cash
Accounts Payable-Osterman Co.

May 26: Refunded cash on sales made for cash, $7,500. The cost of the merchandise returned was $4,800.

Description	Post. Ref.	Debit	Credit
Customers Refunds Payable
Cash
Merchandise Inventory
Estimated Returns Inventory

May 28: Paid sales salaries of $56,000 and office salaries of $29,000.

Description	Post. Ref.	Debit	Credit
Sales Salaries Expense
Office Salaries Expense
Cash

May 29: Purchased store supplies for cash, $2,400.

Description	Post. Ref.	Debit	Credit
Store Supplies
Cash

May 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.

Description	Post. Ref.	Debit	Credit
Accounts Receivable-Turner Co.
Sales
Cost of Merchandise Sold
Merchandise Inventory

May 30: Received cash from sale of May 20 plus freight paid on May 21.

Description	Post. Ref.	Debit	Credit
Cash
Accounts Receivable-Crescent Co.

May 31: Paid for purchase of May 21, less return of May 24.

Description	Post. Ref.	Debit	Credit
Accounts Payable-Osterman Co.
Cash

Part 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 May, the last month of the fiscal year, below.

Part 2: Post the journal to the general ledger you created in Part 1, 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.

Comprehensive Problem 2 Part 3:

NOTE: You must complete parts 1 and 2 before completing part 3.

Prepare an unadjusted trial balance. If an amount box does not require an entry, leave it blank.

Comprehensive Problem 2 Part 4 and 6:

Note: You must complete parts 1, 2 and 3 before attempting to complete part 4 and part 6. Part 5 is an optional work sheet.

4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete Part 6.

a.	Merchandise inventory on May 31			$570,000
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 returns and allowances is $60,000 for sales and $35,000 for cost of merchandise sold.

6. Journalize the adjusting entries. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Post the adjusting entries to the spreadsheet you used in parts 1 and 2.

Comprehensive Problem 2 Part 7:

You must complete parts 1, 2, 3, 4 and 6 before completing part 7. Part 5 is the optional work sheet.

Prepare an adjusted trial balance. If an amount box does not require an entry, leave it blank or enter "0".

Comprehensive Problem 2 Part 8:

1. Prepare an income statement.

Part 9:

Journalize the closing entries. Then post the journal to the general ledger you created in part 1. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers. 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.

If an amount box does not require an entry, leave it blank.

omprehensive Problem 2 Part 10:

Prepare a post-closing trial balance. If an amount box does not require an entry, leave it blank.