Spring Time 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. Spring Time 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.)

1. 110Cash
2. 111Accounts Receivable
3. 112Allowance for bad debts
4. 113Allowance for sales returns
5. 114Inventory
6. 115Estimated Returns Inventory
7. 116Supplies
8. 117Prepaid Insurance

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

1. 131Land
2. 132Equipment
3. 133Accumulated Depreciation-- Equip.

141 Deferred T ax Asset

1. 211Accounts Payable
2. 212Salaries Payable
3. 213Refund liability
4. 214Deferred Rent Revenue
5. 215Notes Payable (due in 8 months)
6. 216Interest Payable
7. 217Income taxes payable
8. 311Common Stock, $1 Par
9. 312Additional paid in capital
10. 313Retained Earnings
11. 314Accumulated Other Comprehensive Income/(Loss)
12. 315Income Summary
13. 316Dividends
14. 411Sales
15. 412Sales returns

511 Cost of Goods Sold

1. 521Sales Salaries Expense
2. 522Advertising Expense
3. 523Delivery Expense
4. 524Depreciation Expense-- Equip.
5. 525Miscellaneous Selling Expense
6. 526Office Salaries Expense
7. 527Rent Expense
8. 528Insurance Expense
9. 529Supplies Expense
10. 530Bad debts expense
11. 531Income taxes expense

611 Rent Revenue 711 Interest Expense

65,900 200,200 2,110 1,900 376,400 0 12,100 30,000

18,300 140,000 997,100

289,600 0 111,300

0

0 33,200

50,000 0 0 100,000

59,000 600,800 1,200

0 75,000

4,381,190

79,200

2,122,100

650,600 220,000 36,000 29,600

42,800

407,000

125,000

0 0 0

0

0

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, terms 2/10,n/30.

4

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

7

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

11

Sold 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
4. posting is completed.
5. Prepare an Unadjusted Trial Balance as of December 31. [Note: You may use an optional end-of-
6. period worksheet if you choose to.]
7. Analyze the following adjustment data assembled at the end of December. Use the adjustment data to
8. 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).)

1. Use an Adjusted Trial Balance as of December 31.
2. Use multiple-step Income Statement, a Statement of Comprehensive Income, a Statement of
3. Shareholders' Equity, and a classified Balance Sheet at the end of the December 31 fiscal year.
4. Journalize and post the necessary closing entries.
5. Post-Closing Trial Balance as of December 31.