6-6i Comprehensive Problem 2 Palisade Creek Co. is a merchandising business that

Question

6-6i Comprehensive Problem 2

Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2019 (unless otherwise indicated), are as follows:

During May, the last month of the fiscal year, the following transactions were completed:

Instructions

4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5).

5. (Optional) Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work sheet), and complete the spreadsheet.

Part 1)

The journal entries are as follows:

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. 21. Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB destination, $88,000. 24. Returned damaged merchandise purchased on May 21, receiving a credit memo from the seller for $5,000. 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 Co., terms 2/10, n/30, FOB shipping point, $78,750. The cost of the merchandise sold was $47,000. 30. Received cash from sale of May 20 plus freight paid on May 21. 31. Paid for purchase of May 21, less return of May 24.

Explanation / Answer

Solution:

Income Statement Statement of Retained Earnings Balance Sheet Revenues: Retained Earnings, October 1 $585,300 Assets: Sales $5,316,205 Plus: Net Income $741,855 Cash $84,500 Total Revenue $5,316,205 Subtotal $1,327,155 Accounts Receivable $245,875 Minus: Dividends -$135,000 Inventory $570,000 Expenses: Retained Earnings, October 31 $1,192,155 Estimated returns inventory $50,200 Cost of goods sold $2,991,950 Prepaid Insurance $4,800 Sales salaries expense $727,800 Store supplies $4,000 Advertising expense $292,000 Store equipment $569,500 Miscellaneous selling expense $12,600 Accumulated depreciation-store equipment -$70,700 Office salaries expense $417,700 Total assets $1,458,175 Rent expense $88,700 Liabilities and Stockholders' Equity Store supplies expense $9,800 Liabilities: Depreciation expense $14,000 Customer refunds payable $89,270 Miscellaneous administrative expense $7,800 Accounts payable $63,150 Insurance expense $12,000 Salaries payable $13,600 Total expenses $4,574,350 Total Liabilities $166,020 Stockholders' Equity: Net Income $741,855 Common Stock $100,000 Miscellaneous administrative expense $7,800 Retained Earnings $1,192,155 Insurance expense $12,000 Total Stockholders' Equity $1,292,155

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