PALISADE CREEK OUTFITTER

Lynn Tolley is the sole proprietor of Palisade Creek Outfitter. Palisade is a wholesale merchandising business that uses the perpetual inventory system. Palisade sells to retail businesses, not consumers, so it does pay sales tax on merchandise inventory purchases, nor does it collect sales tax from its customers. However, Palisade does pay sales tax on goods and services that it consumes internally; all such transaction amounts already include sales tax. Palisade initially records purchases & sales net of discounts. Palisade reports on a fiscal year basis starting June $1$ and ending May $31.$

PART $1$: Use the Beginning Trial Balance $($BTB$)$ to fill in the Beginning Balance $($BB$)$ for each Ledger Account.

PART $2$ : Prepare General Journal Entries $($GJE$$s$)$ for the MAY TRANSACTIONS below.

MAY TRANSACTIONS

May $1$: Paid $$14,560$ to IRS for April accrued payroll taxes.

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

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

May $4$: Paid $$600$ freight on the May $3$ purchase.

May $6$: Sold $$68,500$ of merchandise to Korman Co$.$ on account, terms $2/10,$ n$/30,$ FOB shipping point. Palisade$$s cost of the merchandise sold was $$41,000.$

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

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

May $13$: Paid for the merchandise purchased on May $3.$

May $15$: Paid $$11,000$ for advertising. The advertisements were published during May.

May $16$: Received cash from the May $6$ sale.

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

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

May $20$: Paid Korman Co$.$ a $$5,000$ cash refund for damaged merchandise from the May $6$ sale. Korman kept the merchandise.

May $20$: Sold $$110,000$ of merchandise to Crescent Co$.$ on account, terms $1/10,$ n$/30,$ FOB shipping point. Palisade$$s cost of the merchandise sold was $$70,000.$

May $21$: Paid $$2,300$ freight, on behalf of Crescent Co$.,$ for the May $20$ sale.

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

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

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

May $26$ : Paid $$800$ cash refund to cash$-$sale customers. The defective merchandise was not returned to Palisade.

May $28$: Paid sales staff salaries of $$56,000($gross$)$ and office staff salaries of $$29,000($gross$)$ for work performed in May. Federal tax law requires Palisade to withhold $7\mathrm{.}65\%$ of employee gross salaries for the employees$$ share of payroll tax. Employees actually received net cash payment of $92\mathrm{.}35\%$ of their gross salaries.

May $29$: Paid $$2,400$ cash to purchase store supplies.

May $30$: Sold $$78,750$ of merchandise to Turner Co$.$ on account, terms $2/10,$ n$/30$ FOB shipping point. Palisade$$s cost of the merchandise sold was $$47,000.$

May $30$: Received cash from the May $20$ sale, plus reimbursement for the freight that Palisade paid on May $21.$

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

May $31$: Paid credit card service fee for May sales, $$625.$

PART $3$ : Post the GJE$$s to the Ledger Accounts.

PART $4$ :Calculate the Unadjusted Balance $($UAB$)$ for each Ledger Account.

PART $5$: Prepare an Unadjusted Trial Balance $($UATB$).$

PART $6$ : Use the information below to prepare the May $31$ Adjusting Journal Entries $($AJE$$s$).$

AJE $1$ A physical count of merchandise inventory revealed that inventory costing $$585,200$ remained on hand May $31,20$Y$7.$

AJE $2$ $$12,000$ of insurance expired during the year.

AJE $3$ A physical count of store supplies revealed that supplies costing $$4,000$ remained on hand May $31,20$Y$7.$

AJE $4$ Depreciation for the year was $$14,000.$

AJE $5$ Accrued but unpaid salaries on May $31,20$Y$7$ were $$7,000$ for sales staff and $$6,600$ for office staff.

AJE $6$ Palisade estimates that the current year sales will result in customer refunds and allowances of $$60,000$ in the coming fiscal year. Inventory returns in the coming fiscal year are estimated to be $$22,000.$JA

AJE $7$ The employees$$ share of federal payroll tax is $7\mathrm{.}65\%$ of gross salaries. By law, Palisade withholds that amount from employee paychecks and pays employees a net cash amount that is equal to gross salary less the employee$$s share of payroll tax. Palisade remits the employee$$s share of tax to the IRS at the end of each month. Between the time the tax is withheld from employees and the time of remittance, the employees$$ share of tax is Palisade$$s liability to the IRS. The last remittance was made May $1,20$Y$7$ for payroll taxes that accrued April $1$ April $30.$ The next remittance will be made June $1,20$Y$7$ for payroll taxes that accrued May $1$ May $31.$

Palisade$$s share of federal payroll tax is $7\mathrm{.}65\%$ of gross salaries paid and accrued. The tax will be paid June $1,20$Y$7$ along with employees$$ share of tax. Prepare Palisade$$s adjusting