Exercise 1 Co. is a merchandising business. The account balances for Palisade Cr

Question

Exercise 1 Co. is a merchandising business. The account balances for Palisade Creek Ca as of May 1, 2014 (unless otherwise indicated), are as follows Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Store Supplies 83,600 233,900 602,400 16,800 11,400 569,500 92.700 9,400 2,823,000 664,800 281,000 Accumulated Depreciation Store Equipment Accounts Salaries Payable Lynn Tolley, Capital, June 1, 2013 Lynn Tolley, Drawing Sales Returns and Allowances Sales Discounts Cost of Merchandise Sold Sales Salaries Expense Advertising Expense Depreciation Expense Store Supplies Expense Miscellaneous Selling Expense Office Salaries Expense Rent Expense Insurance Expense Miscellaneous Administrative Expense S6,700 96,600 12,600 382,100 83,700 685,300 135,000 5221.100 7,800 During May, the last month of the fiscal year, the following transactions were completed: 1. Paid rent for May, $5,000 3. Purchased merchandise on account 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, no discount 10. Sold merchandise for cash, $54,000. The cost of the merchandise sold was $32,000. 13. Paid for merchandise purchased on May 3, less discount 14. Received merchandise returned on sale of May 6,$13,500. The cost of the merchandise returned was $8,000. 15. Paid advertising expense for last half of May, $11,000. 16. Received cash from sale of May 6, less return of May 14 and discount 19. Purchased merchandise for cash, $18,700. 19. Paid $33,450 to Buttons Co. on account, no discount. from Martin Co, terms 2/10, n/30, FOB shipping point, $36,000 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, no discount. 21. Purchased merchandise on account from Osterman Co, terms 1/10, n/30, FOB destination, $88,000. 24. Returned $5,000 of damaged merchandise purchased on May 21, receiving credit from the seller 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 a terms 2/10, ? 30, POB shipping point, S78750. The cost of the merchandise sold was $47,000 30. Received cash from sale of May 20, less discount, plus freight paid on May 21. 31. Paid for purchase of May 21, less return of May 24 and discount. Instructions: 1. Journalize the transactions 2 Prepare an unadjusted trial balance. 3. At the end of May, the following adjustment data were assembl ed a Merchandise inventory on May 31 b. Insurance expired during the year c Store supplies on hand on May 31 d. Depreciation for the current year e. Accrued salaries on May 31 $S50,000 12,000 4,000 14,000 $7,000 6,600 Sales salaries Office salaries 4. Prepare an adjusted trial balance 13,600 5. Prepare an income statement, a statement of owner's equity, and a balance sheet

Explanation / Answer

Ledger:

S No Date Account Debit Credit 1 May 1 Rent Expense 5000 1 May 1 Cash 5000 (Being Rent Paid) 2 May 3 Merchandise Inventory 36000 2 May 3 Accoutns Payable 36000 (being inventory purchased) 3 May 4 Merchandise Inventory 600 3 May 4 Cash 600 (Freight Paid) 4 May 6 Accounts Receivable 68500 4 May 6 Revenue 68500 (being Sales done) 5 May 6 Cost of goods sold 41000 5 May 6 Merchandise Inventory 41000 (COGS of sales) 6 May 7 Cash 22300 6 May 7 Unearned Revenue 22300 (being advance received) 7 May 10 Cash 54000 7 May 10 Revenue 54000 (Cash Sale) 8 May 10 Cost of goods sold 32000 8 May 10 Merchandise Inventory 32000 (COGS) 9 May 13 Accounts Payable 36000 9 May 13 Cash 35280 9 May 13 Merchandise Inventory 720 2% Discount (payment done after taking discount) 10 May 16 Cash 67130 10 May 16 Sales Discoung 1370 2% discoung 10 May 16 Accounts Receivable 68500 (Cash received after discount) 11 May 19 Merchandise Inventory 18700 11 May 19 Cash 18700 (Inventory purchased) 12 May 20 Revenue Return 13230 12 May 20 Cash 13230 13 May 20 Merchandise Inventory 8000 13 May 20 Cost of Goods Sold 8000 14 May 20 Accounts Receivable 110000 14 May 20 Revenue 110000 15 May 20 Cost of Goods Sold 70000 15 May 20 Merchandise Inventory 70000 16 May 21 Accounts Receivable 2300 16 May 21 Cash 2300 17 May 21 Accounts Receivable 42900 17 May 21 Unearned Revenue 42900 18 May 21 Merchandise Inventory 88000 18 May 21 Accounts Payable 88000 19 May 24 Accounts Payable 5000 19 May 24 Merchandise Inventory 5000 20 May 26 Revenue Return 7500 20 May 26 Cash 7500 21 May 26 Merchandise Inventory 4800 21 May 26 Cost of Goods Sold 18000 22 May 28 Sales Salaries Expense 56000 22 May 28 Office Salaries Expense 29000 22 May 28 Cash 85000 23 May 28 Store Supplies 2400 23 May 28 Cash 2400 24 May 30 Accounts Receivable 78750 24 May 30 Revenue 78750 25 May 30 Cost of Goods Sold 47000 25 May 30 Merchandise Inventory 47000 26 May 30 Sale Discount 2100 26 May 30 Cash 111200 26 May 30 Accounts Receivable 113300 27 May 31 Accounts Payable 83000 27 May 31 Cash 83000 Closing Entries 1 May 31 Insurance Expense 12000 1 May 31 Prepaid Insurance 12000 2 May 31 Store Supplies Expense (11400+2400-4000) 9800 2 May 31 Store Supplies 9800 3 May 31 Depreciation Expense 14000 3 May 31 Accumulated Depcreciation 14000 4 May 31 Sales Salaries Expense 7000 4 May 31 Office Salaries Expense 6600 4 May 31 Salaries Payable 13600 5 May 31 Cost of goods sold (562780-from ledger-555000) 7780 5 May 31 Merchandise Inventory 7780 (Inventory shrinkage

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