Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Textbook Question
Chapter 9, Problem 9.4E
Transaction Analysis
Polly’s Cards $ Gifts Shop had the following transactions during the year:
- Polly’s purchased inventory on account from a supplier for $8,000. Assume that Polly’s uses a periodic inventory system.
- On May 1, land was purchased for $44,500. A 20% down payment was made, and an 18-month, 8% note was signed for the remainder.
- Polly’s returned $450 worth of inventory purchased in (a), which was found broken when the inventory was received.
- Polly’s paid the balance due on the purchase of inventory.
- On June 1, Polly signed a one-year, $15,000 note to First State Bank and received $13,800.
- Polly’s sold 200 gift certificates for $25 each for cash. Sales of gift certificates are recorded as a liability. At year-end, 35% of the gift certificates had been redeemed.
- Sales for the year were $120,000, of which 90% were for cash. State sales tax of 6% applied to all sales must be remitted to the state by January 31.
Required
- Record all necessary
journal entries relating to these transactions. - Assume that Polly’s accounting year ends on December 31. Prepare any necessary
adjusting journal entries. - What is the total of the current liabilities at the end of the year?
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