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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2019 (unless otherwise indicated), are as follows:

110 Cash $83,600
112 Accounts Receivable 233,900
115 Merchandise Inventory 624,400
116 Estimated Returns Inventory 28,00
117 Prepaid Insurance 16,800
118 Store Supplies 11,400
123 Store Equipment 569,500
124 Accumulated Depreciation—Store Equipment 56,700
210 Accounts Payable 96,600
211 Customer Refunds Payable 50,000
212 Salaries Payable
310 Lynn Tolley, Capital, June 1, 2018 685,300
311 Lynn Tolley, Drawing 135,000
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

During May, the last month of the fiscal year, the following transactions were completed:

May 1. Paid rent for May, $5,000.
3. Purchased merchandise on account from Martin Co., terms 2/10, n/30, FOB shipping point, $36,000
4. Paid freight on purchase of May 3, $600.
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.
7. Received $22,300 cash from Halstad Co. on account.
10. Sold merchandise for cash, $54,000. The cost of the merchandise sold was $32,000.
13. Paid for merchandise purchased on May 3.
15. Paid advertising expense for last half of May, $11,000.
16. Received cash from sale of May 6.
19. Purchased merchandise for cash, $18,700.
19. Paid $33,450 to Buttons Co. on account.
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.
  Record the following transactions on Page 21 of the journal:
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.
21. For the convenience of Crescent Co., paid freight on sale of May 20, $2,300.
21. Received $42,900 cash from Gee Co. on account.
21. Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB destination, $88,000.
24. Returned damaged merchandise purchased on May 21, receiving a credit memo from the seller for $5,000.
26. Refunded cash on sales made for cash, $7,500. The cost of the merchandise returned was $4,800.
28. Paid sales salaries of $56,000 and office salaries of $29,000.
29. Purchased store supplies for cash, $2,400.
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.
30. Received cash from sale of May 20 plus freight paid on May 21.
31. Paid for purchase of May 21, less return of May 24.

Instructions

  1. 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, starting on Page 20 of the journal.
  2. 2. Past the journal to the general ledger, 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.
  3. 3. Prepare an unadjusted trial balance.
  4. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).
  5. a. Merchandise inventory on May 31 $570,000
  6. b. Insurance expired during the year 12,000
  7. c. Store supplies on hand on May 31 4,000
  8. d. Depreciation for the current year 14,000
  9. 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.

5.    (Optional) Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work sheet), and complete the spreadsheet.

6.    Journalize and post the adjusting entries. Record the adjusting entries on Page 22 of the journal.

7.    Prepare an adjusted trial balance.

8.    Prepare an income statement, a statement of owner’s equity, and a balance sheet.

9.    Prepare and post the closing entries. Record the closing entries on Page 23 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. Insert the new balance in the owner s capital account.

10.    Prepare a post-closing trial balance.

1, 2, 6, and 9.

To determine

To Post: The balance of each of the accounts.

Explanation

Enter the balances of each of the accounts.

Cash Account:

Cash Account Account No. 110
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 83,600
1 20 5,000
4 20 600
7 20 22,300
10 20 54,000
13 20 35,280
15 20 11,000
16 20 67,130
19 20 18,700
19 20 33,450
20 20 13,230
21 21 2,300
21 21 42,900
26 21 7,500
28 21 85,000
29 21 2,400
30 21 111,200
31 21 82,170 84,500

Table (1)

Accounts Receivable Account:

Accounts Receivable Account No. 112
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 233,900
6 20 67,130
7 20 22,300
16 20 67,130
20 21 108,900
21 21 2,300
21 21 42,900
30 21 77,175
30 21 111,200 245,875

Table (2)

Inventory Account:

Inventory Account No. 115
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 624,400
3 20 35,280
4 20 600
6 20 41,000
10 20 32,000
19 20 18,700
20 20 8,000
20 21 70,000
21 21 87,120
24 21 4,950
26 21 4,800
30 21 47,000 583,950
31 Adjusting 22 13,950 570,000

Table (3)

Estimated Returns Inventory Account:

Estimated Returns Inventory Account No. 116
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 28,000
20 20 8,000
26 21 4,800 15,200
31 Adjusting 22 35,000 50,200

Table (4)

Prepaid Insurance Account:

Prepaid Insurance Account No. 117
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 16,800
31 Adjusting 22 12,000 4,800

Table (5)

Store Supplies Account:

Store Supplies Account No. 118
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 11,400
29 21 2,400 13,800
31 Adjusting 22 9,800 4,000

Table (6)

Store Equipment Account:

Store Equipment Account No. 123
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 569,500

Table (7)

Accumulated Depreciation – Store Equipment Account:

Accumulated Depreciation – Store Equipment Account No. 124
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 56,700
31 Adjusting 22 14,000 70,700

Table (8)

Accounts Payable Account:

Accounts Payable Account No. 210
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 96,600
3 20 35,280
13 20 35,280
19 20 33,450
21 21 87,120
24 21 4,950
31 21 82,170 63,150

Table (9)

Salaries Payable Account:

Salaries Payable Account No. 211
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 31 Adjusting 22 13,600 13,600

Table (10)

Customers Refunds Payable Account:

Customers Refunds Payable Account No. 212
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 50,000
20 20 13,230
26 21 7,500 29,270
31 Adjusting 22 60,000 89,270

Table (11)

Common Stock Account:

Common Stock Account No. 310
Date Item

Post.

Ref.

Debit Credit Balance ($)
Debit Credit
2018
May 1 Balance 100,000

Table (12)

Retained Earnings Account:

Retained Earnings Account No...

1. And 2.

To determine

To Record: The journal entries.

3.

To determine

To Prepare: The unadjusted trial balance of Company P.

4. and 6.

To determine

To Record: The adjusting entry.

7.

To determine

To Prepare: The adjusted trial balance of Company P.

8.

To determine

To Prepare: The income statement, retained earnings, and balance sheet of P Company.

9.

To determine

To Post: The closing entries.

10.

To determine

To Prepare: The post-closing trial balance.

5.

To determine

To Prepare: The worksheet for Company P.

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