Ocean Atlantic Co. is a merchandising business. The account balances for Ocean A
ID: 2375105 • Letter: O
Question
Ocean Atlantic Co. is a merchandising business. The account balances for Ocean AtlanticCo. as of July 1, 2012 (unless otherwise indicated), are as follows:
110 Cash $ 63,600
112 Accounts Receivable 153,900
115 Merchandise Inventory 602,400
116 Prepaid Insurance 16,800
117 Store Supplies 11,400
123 Store Equipment 469,500
124 Accumulated Depreciation—Store Equipment 56,700
210 Accounts Payable 96,600
211 Salaries Payable —
310 Capital Stock 75,000
311 Retained Earnings, August 1, 2011 480,300
312 Dividends 135,000
313 Income Summary —
410 Sales 3,221,100
411 Sales Returns and Allowances 92,700
412 Sales Discounts 59,400
510 Cost of Merchandise Sold 1,623,000
520 Sales Salaries Expense 334,800
521 Advertising Expense 81,000
522 Depreciation Expense —
523 Store Supplies Expense —
529 Miscellaneous Selling Expense 12,600
530 Offi ce Salaries Expense 182,100
531 Rent Expense 83,700
532 Insurance Expense —
539 Miscellaneous Administrative Expense 7,800
During July, the last month of the fiscal year, the following transactions were completed:
July 1. Paid rent for July, $4,000.
3. Purchased merchandise on account from Lingard Co., terms 2/10, n/30, FOB
shipping point, $25,000.
4. Paid freight on purchase of July 3, $1,000.
6. Sold merchandise on account to Holt Co., terms 2/10, n/30, FOB shipping
point, $40,000. The cost of the merchandise sold was $24,000.
7. Received $18,000 cash from Flatt Co. on account, no discount.
10. Sold merchandise for cash, $90,000. The cost of the merchandise sold was $50,000.
13. Paid for merchandise purchased on July 3, less discount.
14. Received merchandise returned on sale of July 6, $7,000. The cost of the
merchandise returned was $4,500.
15. Paid advertising expense for last half of July, $9,000.
16. Received cash from sale of July 6, less return of July 14 and discount.
19. Purchased merchandise for cash, $22,000.
19. Paid $23,100 to Carino Co. on account, no discount.
Record the following transactions on Page 21 of the journal.
20. Sold merchandise on account to Reedley Co., terms 1/10, n/30, FOB shipping
point, $40,000. The cost of the merchandise sold was $25,000.
21. For the convenience of the customer, paid freight on sale of July 20, $1,100.
21. Received $17,600 cash from Owen Co. on account, no discount.
21. Purchased merchandise on account from Munson Co., terms 1/10, n/30, FOB
destination, $32,000.July 24. Returned $5,000 of damaged merchandise purchased on July 21, receiving
credit from the seller.
26. Refunded cash on sales made for cash, $12,000. The cost of the merchandise
returned was $7,200.
28. Paid sales salaries of $22,800 and offi ce salaries of $15,200.
29. Purchased store supplies for cash, $2,400.
30. Sold merchandise on account to Dix Co., terms 2/10, n/30, FOB shipping point,
$18,750. The cost of the merchandise sold was $11,250.
31. Received cash from sale of July 20, less discount, plus freight paid on July 21.
32. Paid for purchase of July 21, less return of July 24 and discount.
Instructions
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 July starting on page 20
of the journal.
2. Post 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.
Explanation / Answer
DR CR
July 1 Rent Expense 4,000
Cash 4,000
July 3 Inventory 25,000
Accounts Payable 25,000
Freight In 1,000
Cash 1,000
July 6 Accounts Receivable 40,000
Sales 40,000
Cost of Goods Sold 24,000
Inventory 24,000
July 7 Cash 18,000
Accounts Receivable 18,000
Jul 10 Cash 90,000
Sales 90,000
Cost of Goods Sold 50,000
Inventory 50,000
Jul 13 Accounts Payable 25,000
Inventory (2% x 25000) 500
Cash 24,500
Jul 14 Sales Returns and Allowances 7,000
Account Receivable 7,000
Inventory 4,500
Cost of Goods Sold 4,500
Jul 15 Advertising Expenses 9,000
Cash 9,000
Jul 16 Cash 32,340
Sales Discount 660
Accounts Receivable 33,000
Jul 19 Inventory 22,000
Cash 22,000
Jul 19 Accounts Payable 23,100
Cash 23,100
Jul 21 Accounts Receivable 40,000
Sales 40,000
Cost of Goods Sold 25,000
Inventory 25,000
Jul 21 Freight Out 1,000
Cash 1,000
Jul 21 Cash 17,600
Accounts Receivable 17,600
Jul 21 Inventory 32,000
Accounts Payable 32,000
Jul 24 Accounts Payable 5,000
Inventory 5,000
Jul 26 Sales Returns and Allowances 12,000
Cash 12,000
Inventory 12,000
Cost of Goods Sold 12,000
Jul 28 Sales Salaries Expense 22,800
Office Salaries Expense 15,200
Cash 38,000
Jul 29 Store Supplies Expense 2,400
Cash 2,400
Jul 30 Accounts Receivable 18,750
Sales 18,750
Cost of Goods Sold 11,250
Inventory 11,250
Cash 40,600
Sales Discount 400
Freight Out 1,000
Accounts Receivable 40,000
Accounts Payable 27,000
Inventory 270
Cash 26,730
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