Problem
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
|
|
112
|
Accounts Receivable
|
233,900
|
|
115
|
Merchandise Inventory
|
624,400
|
|
116
|
Estimated Returns Inventory
|
28,000
|
|
117
|
Prepaid Insurance
|
16,800
|
|
118
|
Store Supplies
|
11,400
|
|
123
|
Store Equipment
|
569,500
|
|
124
|
Accumulated Depreciation-Store Equipment
|
56,700
|
|
210
|
Accounts Payable
|
96,600
|
|
211
|
Salaries Payable
|
-
|
|
212
|
Customers Refunds Payable
|
50,000
|
|
310
|
Lynn Tolley, Capital, June 1, 2015
|
685,300
|
|
311
|
Lynn Tolley, Drawing
|
135,000
|
|
312
|
Income Summary
|
-
|
|
410
|
Sales
|
5,069,000
|
|
510
|
Cost of Merchandise Sold
|
2,823,000
|
|
520
|
Sales Salaries Expense
|
664,800
|
|
521
|
Advertising Expense
|
281,000
|
|
522
|
Depreciation Expense
|
-
|
|
523
|
Store Supplies Expense
|
-
|
|
529
|
Miscellaneous Selling Expense
|
12,600
|
|
530
|
Office Salaries Expense
|
382,100
|
|
531
|
Rent Expense
|
83,700
|
|
532
|
Insurance Expense
|
-
|
|
539
|
Miscellaneous Administrative Expense
|
7,800
|
During May, the last month of the fiscal year, the following transactions were completed:
Record the following transactions on page 20 of the journal. Refer to the Chart of Accounts for exact wording of account titles.
|
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. Refer to the Chart of Accounts for exact wording of account titles.
May 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 of 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.
Required:
1. Download the spreadsheet in the Ledger panel and save the Excel file to your computer. Use the spreadsheet to post the May transactions from the journal to a ledger of four-column accounts. Be sure to save your work in Excel as it will be used to complete the following steps in Part 1 of this problem as well as steps in Part 2 of this problem. Your input into the spreadsheet will not be included in your grade in CengageNOW on this problem.
A. Enter the May 1 balances of each of the accounts in the appropriate balance column of a four-column account. Enter May 1 in the date column. Write Balance in the item section, and enter "X" in the Posting Reference column.
B. Journalize the transactions for May, 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. Add the appropriate posting reference to the journal.
3. Prepare an unadjusted trial balance. Accounts with zero balances can be left blank.
4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).
• Merchandise inventory on May 31, $570,000
• Insurance expired during the year, $12,000
• Store supplies on hand on May 31, $4,000
• Depreciation for the current year, $14,000
• Accrued salaries on May 31:
Sales salaries, $7,000
Office salaries, $6,600
Total accrued salaries: $13,600
• The adjustment for customer returns and allowances is $60,000 for sales and $35,000 for cost of merchandise sold.
5. (Optional) On your own paper or spreadsheet, enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work sheet), and complete the spreadsheet. Find a blank end-of-period work sheet in the Excel spreadsheet you previously downloaded.
6. A. Journalize the adjusting entries. Record the adjusting entries on Page 22 of the journal.*
B. Post the adjusting entries. Add the appropriate posting reference to the journal.
7. Prepare an adjusted trial balance. Accounts with zero balances can be left blank.
* Refer to the Chart of Accounts for exact wording of account titles.