The Fashion Rack The Fashion Rack is a retail merchandising business that sells brand-name clothing at discount prices. The fi- is owned and managed by Teresa Lojay, who started the business on April 1, 2020. This project will give you opportunity to put your knowledge of accounting into practice as you handle the accounting work of The Fashion Rack during the month of October 2020, INTRODUCTION The Fashion Rack has a monthly accounting period. The firm's chart of accounts is shown below. The journals used to record transactions is the general journal. The employees are paid at the end of the month. A computerized payroll service prepares all payroll records and checks. INSTRUCTIONS 1. Analyze the transactions for October and record each transaction in the General journal. (Use 16 as the number for the first page of the general journal.) 2. Post the transactions to the general ledger accounts. 3. Check the accuracy of the subsidiary ledgers by preparing a schedule of accounts receivable and a schedule of accounts payable as of October 31, 2020. Compare the totals with the balances of the Accounts Receivable account and the Accounts Payable account in the general ledger. 4. Check the accuracy of the general ledger by preparing a trial balance in the first two columns of a 10- column worksheet. Make sure that the total debits and the total credits are equal. 5. Complete the Adjustments section of the worksheet. Use the following data. Identify each adjustment with the appropriate letter. Round to the nearest whole dollar. a. During October, the firm only had net credit sales. From experience with similar businesses, the previous accountant had estimated that 1.0 percent of the firm's net credit sales would result in uncollectible accounts. Record an adjustment for the expected loss from uncollectible accounts for the month of October. b. On October 31, an inventory of the supplies showed that items costing $3,240 were on hand. Record an adjustment for the supplies used in October. 6. On September 30, 2020, the firm purchased a six-month insurance policy for $8,400. Record an adjustment for the expired insurance for October. d. On October 1, the firm signed a three-month advertising contract with a local cable television station and paid the full amount in advance. Record an adjustment for the expired advertising for October On April 1, 2020, the firm purchased equipment for $83,000. The equipment was estimated to have a useful life of five years and a salvage value of $12,500. Record an adjustment for depreciation on the equipment for October. f.-gBased on a physical count, ending merchandise inventory was determined to be $81,260. 6. Complete the Adjusted Trial Balance section of the worksheet. 7. Determine the net income or net loss for October and complete the worksheet. 8. Prepare a classified income statement for the month ended October 31, 2020. (The firm does not divide its operating expenses into selling and administrative expenses.) 9. Prepare a statement of owner's equity for the month ended October 31, 2020. 10. Prepare a classified balance sheet as of October 31, 2020. 11. Journalize and post the adjusting entries using general journal page 20. e. 2 C $ 5,100.00 5,600.00 $ 415.00 Transactions for 2020 Date Oct 1 Issued CK 601 to pay City Properties for monthly rent 1 Signed a three-month radio advertising contract with Cable Station KOTU, issued Ck 602 to pay the full amount in advance 2 Received payment from Magen Greenly, a credit customer, in payment of her account. 2 issued CK 603 to rernit the sales tax owed for July through September to the State Tax Commission. 2 Issued CK 604 to A Fashion Statement, a creditor, in payment of invoice 9387, less a cash discount. 3 Sold Merchandise on credit to Dimitri Sayegh plus tax, sales slip 241. $ 17,894.00 Invoice Amount Cash Discount Sales Slip Tax $ $ $ $ $ 4 9,167.00 183.34 1,747.00 103.00 1,440.00 7,440.00 148.80 1,584.00 651.00 D 4 Invoice Amount Cash Discount $ $ $ 5 Issued CK 605 to BMX Supply Co. for supplies. Issued Ck 606 to Today's Woman, a creditor, in payment of invoice 5671, less a cash discount. Collected on account from Emily Tran, a credit customer. Accepted a return of merchandise from Dimitri Sayegh. The merchandise was originally sold on sales slip 241, dated October 3; issued credit memo which included tax Issued CK 607 to Classy Threads, a creditor, in payment of invoice 3292, less a cash discount Had cash sales plus tax during October 1-6. 5 Credit Memo Tax $ $ 42.00 5 Invoice Amount Cash Discount Sales Tax 6 $ 1,349.00 $ 26.98 $ 18,645.00 $ 945.00 $ 712.00 8 Received a check from James Helmer, a credit customer, to pay the balance he owes issued CK 608 to deposit Social Security, Medicare and employee income tax from the September payroll 8 Social Security Medicare Employee Income Tax Sales Slip Tax $ $ $ S $ S 530.00 261.00 987.00 2,330.00 170.00 1,704.00 9 10 11 Sold Merchandise on credit to Emma Maldonado plus tax, sales slip 242 issued Ck 609 to pay The City Daily for a newspaper advertisement that appeared in October Purchased merchandise from A Fashion Statement Invoice 9422, dated October 8, terms are 2/10, n/30. Issued CK 610 to pay freight charges to Ace Freight Company the trucking company that delivered merchandise from A Fashion Statement on September 27 and October 11. Had cash sales plus tax during October 8-13 $ 4,317.00 12 S 536.00 13 Sales Tax Sales Slip Tax 15 $ 11,914.00 $ 689.00 $ 1,675.00 $ 71.00 $ 6,602.00 16 16 Sold Merchandise on credit to James Helmer plus tax, sales slip 243 Purchased discontinued merchandise from Acme Jobbers, paid for it immediately with Ck 611. Received payment on account from Dimitri Sayegh, a credit customer Issued Ck 612 to A Fashion Statement, a creditor, in payment of invoice 9422, less a cash discount. Issued Ck 613 to Teresa Lajay as a withdrawal for personal use. $ 562.00 16 Invoice Amount Cash Discount $ $ $ 4,317.00 86.34 7,328.00 18 20 Had cash sales plus tax during October 15-20. Sales Tax 22 24 $ 12,982.00 $ 614.00 $ 1,307.00 $ 792.00 $ 41.00 $ 3,972.00 Sales Slip Tax Issued CK 614 to City Utilities to pay monthly electric bill. Sold Merchandise on credit to Magen Greening plus tax, sales slip 244. Purchased merchandise from Classy Threads, Invoice 3418, dated October 23; terms are 2/10, n/30. Issued Ck 615 to Regional Telephone to pay monthly telephone bill. Had cash sales plus tax during October 22-27 25 26 $ 825.00 27 Sales Tax $ 14,710.00 $ 705.00 $ 455.00 29 29 Received Credit Memo 175 from Classy Threads for defective good that were returned. The original purchase was recorded on October 25. Sold Merchandise on credit to Emily Tran plus tax, sales slip 245. Recorded the October payroll. The records prepared by the payroll service are as follows: Sales Slip $ 4,922.00 $ 177.00 $ 10,200.00 Tax Earnings 29 $ $ Social Security Medicare Employee Income Tax Net Pay Social Security $ $ $ 654.00 136.00 1,108.00 8,302.00 654.00 29 Recorded the employer's payroll taxes, which are calculated by the payroll service are as follows: Medicare $ 136.00 FUTA SUTA $ $ $ 130.00 642.00 3,254.00 30 31 $ 8,302.00 Purchased merchandise from Today's Woman, Invoice 5821, dated October 26; terms are 1/10, n/30. Issued Cks 616 through 619 to employees to pay October payroll. For the sake of simpllicity, enter the total of the checks on a single line in the general journal. Issued Ck 620 to Handy Janitors for October Janitorial services. Had cash sales plus tax during October 29-31. 31 31 Sales Tax $ $ $ 491.00 1,057.00 83.00