Palisade Creek Co. is a merchandising business that uses the perpetual inventory

Question

Palisade Creek Co. is a merchandising business that uses the perpetual inventory system The account balances for Palisade Creek Co. as of May 1, 2016 (unless otherwise indicated) are as follows: 110 Cash 83,600 233,900 624,400 28,000 6,800 11,400 569,500 56,700 96,600 5 112 Accounts Receivable 115 Merchandise Inventory 116 Estimated Returns Inventory 117 Prepaid Insurance 118 Store Supplies 123 Store Equipment 124 Accumulated Depreciation-Store Equipment 210 Accounts Payable 211 Salaries Payable 212 Customers Refunds Payable 310 Lynn Tolley, Capital, June 1, 2015 311 Lynn Tolley, Drawing 312 Income Summary 410 Sales 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense 523 Store Supplies Expense 529 Miscellaneous Selling Expense 530 Office Salaries Expense 531 Rent Expense 532 Insurance Expense 50,000 685,300 35,000 5,069,000 2,823,000 664,800 281,000 12,600 382,100 83,700 539 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. Continued)

Explanation / Answer

Date Description Debit Credit May 1, 2016 Rent Expenses $5,000 Cash $5,000 May 3, 2016 Merchandise Inventory ($36,000 x (1-2%) $35,280 Accounts Payable—Martin Co. $35,280 May 4, 2016 Merchandise Inventory $600 Cash $600 May 6, 2016 Accounts Receivable—Korman Co. $67,130 Sales ($68,500 x (1-2%) $67,130 May 6, 2016 Cost of Merchandise Sold $41,000 Merchandise Inventory $41,000 May 7, 2016 Cash $22,300 Accounts Receivable—Halstad Co. $22,300 May 10, 2016 Cash $54,000 Sales $54,000 May 10, 2016 Cost of Merchandise Sold $32,000 Merchandise Inventory $32,000 May 13, 2016 Accounts Payable—Martin Co. $35,280 Cash $35,280 May 15, 2016 Advertising Expense $11,000 Cash $11,000 May 16, 2016 Cash $67,130 Accounts Receivable—Korman Co. $67,130 May 19, 2016 Merchandise Inventory $18,700 Cash $18,700 May 19, 2016 Accounts Payable—Buttons Co. $33,450 Cash $33,450 May 20, 2016 Customers Refunds Payable $13,230 Cash $13,230 May 20, 2016 Accounts Receivable—Cresent Co. $108,900 Sales ($110,000 x (1-1%) $108,900 May 20, 2016 Cost of Merchandise Sold $70,000 Customers Refunds Payable $70,000 May 21, 2016 Accounts Receivable—Cresent Co. $2,300 Cash $2,300 May 21, 2016 Cash $42,900 Accounts Receivable—Gee Co. $42,900 May 21, 2016 Merchandise Inventory ($88000 x (1-1%) $87,120 Accounts Payable—Osterman Co. $87,120 May 24, 2016 Accounts Payable—Osterman Co. $4,950 Merchandise Inventory $4,950 May 26, 2016 Customers Refunds Payable $7,500 Cash $7,500 Merchandise Inventory $4,800 Estimated Returns Inventory $4,800 May 26, 2016 Sales Salaries Expense $56,000 Office Salaries Expense $29,000 Cash $85,000 May 29, 2016 Store Supplies $2,400 Cash $2,400 May 30, 2016 Accounts Receivable—Turner Co. $77,175 Sales ($78750 x (1-2%) $77,175 Cost of Merchandise Sold $47,000 Store Supplies $47,000 May 30, 2016 Cash $111,200 Accounts Receivable—Crescent Co. $111,200 May 31, 2016 Accounts Payable—Osterman Co $82,170 Cash ($87,120 – $4,950) $82,170

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