You have been recruited as Senior Accounts Supervisor in Holman Groceries Compan

Question

You have been recruited as Senior Accounts Supervisor in Holman Groceries Company and your first task is to report on the below two issues at a meeting of managers within the next three days. Show your financial solutions to the below problems. (Treat each question as separate and exclusive.)

(Maximum ten (10) points are available for presentation)

1. Given the following selected adjusted balances of the accounts from the books of Holman Groceries Company, as at 12/31/2017.

Sales                             $185,620                      Sales discount                                $3,100

Transportation-in                          7,425                     Purchases returns/allowances                    1,820

Purchases                         61,180                      Transportation-out                           5,060

Beginning inventory                  38,250                      Sales returns/allowance                    4,645

Purchase discount                        8,300                      Sales salaries expenses         18,740

Warehouse rent                  9,600                      Office rent                          18,000

Insurance expense                      4,800                       Lighting and heating             9,600

Admin salaries expense             8,300                       Advertising expense                        8,400

Supplies expense               6,600                       Miscellaneous expense         12,900

Income from investment          49,000                       Loss on sale of fixed asset             25,000

Dividends paid             12,000                       Retained earnings                          53,000

Note: The value of closing inventory, after physical count, was $32,100.

Required:

a. Journalize the closing entries for the company.                                                             

b. Prepare the multi-step income statement, in proper form, for period ended 12/31/2017. 30 points

(The joint costs identified are allocated in percentage of selling 55% and administration 45%.)

c. Calculate the gross profit ratio and the operating profit ratio?                                        

2. The following information is available for Holman Groceries Company for the month of December 2018:
a. On December 31, after all transactions have been recorded, the balance in the company's Cash account has a balance of $27,202.
b. The company's bank statement shows a balance on December 31 of $29,279.
c. Check #3030 in the amount of $1,525 was found to be outstanding in the November 2017 reconciliation, and check #3556 in the amount of $1,459 was issued in December, 2017. Both checks are not amongst the batch of cancelled checks received from the Bank with the December, 2017 bank statement.
d. A credit memo included with the bank statement indicates that the bank collected $780 on a noninterest-bearing note receivable for Holman. The bank deducted a $10 collection fee and credited the remainder of $770 to Holman's account.
e. A debit memo included with the bank statement shows a $67 NSF check from a customer, J. Brown.
f. A deposit placed in the bank's night depository on December 31 totaled $1,675 and did not appear on the bank statement.
g. Examination of the checks on the bank statement with the entries in the accounting records reveals that check #3445 for the payment of an account payable was correctly written for $2,450, but was recorded in the accounting records as $2,540.
h. Included with the bank statement was a debit memorandum in the amount of $25 for bank service charges. It has not been recorded in the company's books.                                                                                  

Required: Prepare the December bank reconciliation for Holman Groceries Company and update the cash book balance.     

Explanation / Answer

1.a.

1.b.

2.

After making the above mentioned adjustments, the bank reconciliation will be as follows.

Holman Groceries Company 1. To Close the purchase accounts to inventory Date Account Title Debit credit Dec.31, 2017 Cost of goods sold * 57210 Purchase discounts 8300 Purchase returns and allowances 1820 Inventory 6150 Purchases 61180 2. To revenue and and expenses to income summary Date Account Title Debit credit Dec.31, 2017 Sales 185620 Income from investments 49000 Cost of goods sold Sales returns and allowances 4645 Sales Discounts 3100 Transportation out 5060 Warehouse Rent 9600 Insurance Expense 4800 Admin. Salaries 8300 Supplies Expense 6600 Office Rent 18000 Lighting and hearing 9600 Advertising expense 8400 Miscellaneous Expense 12900 Loss on sale of fixed assets 25000 Income Summary 118615 3. To close income summary to retained earnings Date Account Title Debit credit Dec.31, 2017 Income Summary 118615 Retained Earnings 118615 4. To close dividend account to retained earnings Date Account Title Debit credit Dec.31, 2017 Retained earnings 12000 Dividends 12000 Beginning inventory 38250 Add: Purchases 61180            Add: Transportaion in 7425             Less: purchase discounts -8300              Less: purchase returns and allowances -1820             Net purchases 58485 Goods available for sale 96735 Less: Ending inventory 32100 Cost of goods sold * 64635

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