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Fall Back Inc. is a merchandising business headquartered in the U.S. and selling primarily to wholesalers.

The accounting information system is based upon the principles and rules of U.S. Generally Accepted Accounting Principles

(GAAP). Business activity is recorded on an accrual basis. The company employs the perpetual inventory system in accounting for its merchandise

inventory. Sales revenue is recorded at the point of sale net of customer discounts. Purchases of inventory are recorded at invoice price. Fall Back operates using a January through December fiscal year. The balances of the accounts in the general ledger as of November 30 of the current fiscal year are as follows: (Assume all balances are normal balances.)

110Cash 65,900

111Accounts Receivable 200,200

112Allowance for bad debts 2,110

113Allowance for sales returns 1,900

114Inventory 376,400

115Estimated Returns Inventory 0

116Supplies 12,100

117Prepaid Insurance 30,000

121Investments in Available for sale securities: Noncurrent (net) 18,300

131Land 140,000

132Equipment 997,100

133Accumulated Depreciation--Equip. 289,600

141Deferred Tax Asset 0

211Accounts Payable 111,300

212Salaries Payable 0

213Refund liability 0

214Deferred Rent Revenue 33,200

215Notes Payable (due in 8 months) 50,000

216Interest Payable 0

217Income taxes payable 0

311CommonStock, $1 Par 100,000

312Additional paid in capital 59,000

313Retained Earnings 600,800

314Accumulated Other Comprehensive Income/(Loss) 1,200

315Income Summary 0

316Dividends 75,000

411Sales 4,381,190

412Sales returns 79,200

511Cost of Goods Sold 2,122,100

521Sales Salaries Expense 650,600

522Advertising Expense 220,000

523Delivery Expense 36,000

524Depreciation Expense--Equip. 29,600

525Miscellaneous Selling Expense 42,800

526 Office Salaries Expense 407,000

527 Rent Expense 125,000

528 Insurance Expense 0

529 Supplies Expense 0

530Bad debts expense 0

531 Income taxes expense 0

611Rent Revenue 0

711Interest Expense 3,000

There are 100,000 shares of common stock outstanding. During December, the last month of the fiscal year, the following transactions were completed:

Dec.1 Received $3,000 in advance payment for December, January, and February rent of warehouse

space.

3 Purchased $24,500 of merchandise on account, FOB shipping point, terms2/10,n/30.

4 Paid transportation costs of $475 on the December 3 purchase.

7 Returned $4,000 of the merchandise purchased on December 3.

11Sold merchandise on account, $12,700, FOB destination, 2/15,n/30. The cost of the merchandise sold was $7,600.

12 Paid transportation charges of $300 for the merchandise sold on December 11.

13 Paid for the purchase of December 3 less the return and the discount.

15 Received payment from customers on account, $8,430. Amount received is net of discount.

22 Received payment on account for the sale of December 11, less the discount.

23 Purchased supplies on account, n/30 $500.

27 Paid sales salaries, $2,300, and office salaries, $1,400.

28 Sold merchandise for cash, $16,500. The cost of the merchandise sold was $11,200.

30 Paid rent on parking lot for December, $1,000,

31 Paid cash for a web page advertisement, $400.

INSTRUCTIONS:

ROUND ALL AMOUNTS TO THE NEAREST DOLLAR, AS NECESSARY!

1.Enter the balances of each of the accounts as of November 30 in the appropriate balance column of a T account (use account names and numbers) or a four-column account. [You are creating the General Ledger.]

2.Journalize (using the General Journal) the transactions for December.

3.Post the December journal entries to the General Ledger, computing the year-end balances after all posting is completed.

4.Prepare an Unadjusted Trial Balance as of December 31. [Note: You may use an optional end-of-period worksheet if you choose to.]

5.Analyze the following adjustment data assembled at the end of December. Use the adjustment data to journalize, then post, the necessary adjusting entries.

a. Merchandise inventory on hand at December 31, per physical count, $301,500.

b. Allowance for bad debts must be increased to 3% of year end accounts receivable.

c. Insurance coverage expired during the year, $12,350.

d. Supplies on hand at December 31, $2,100.

e. Additional depreciation to be recorded on the equipment for the year, $14,130.

f. Accrued sales salaries $1,800 and accrued office salaries $890 on December 31.

g. Accrued interest on the note payable as of December 31, $240.

h. Record rent revenue earned as of December 31 from the advance payment received on December 1 (as described above).

i. Estimated additional customer returns expected to be 0.8% of year-end sales revenue and cost of additional expected returned inventory is expected to be $27,000. 70% of additional expected returns are estimated to be from sales on account. 30% of additional expected returns are estimated to be from cash sales.

j. Income taxes must be recorded at 30% of income before income taxes. 30% tax rate applies on all tax-related items.

k. Record unrealized loss on available for sale securities of $2150. (This entry debits AOCI ($1505) and Deferred tax asset ($645)

and credits the Investment account ($2150).)

6. Prepare an Adjusted Trial Balance as of December 31.

7. Prepare a multiple-step Income Statement, a Statement of Comprehensive Income, a Statement of Shareholders Equity, and

a classified Balance Sheet at the end of the December 31 fiscal year.

8. Journalize and post the necessary closing entries.

9. Prepare a Post-Closing Trial Balance as of December 31.