The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2

Question

The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2016, after the closing entries were posted:

account title                          debit                             credit

cash                                  $125,000

account receivable            128,000

allowance for doubful accounts                                      $19,500

inventory                          431,000

account payable                                                          98,000

common stock                                                              465,000

retained earning                                                           101,500

totals                                               $684,000               $684,000

Tile, Et. had the following transactions in 2017:

1. Purchased merchandise on account for $595,000

2. Sold merchandise that cost $435,000 for $920,000 on account

3. Sold for $260,000 cash merchandise that had cost $166,000

4. Sold merchandise for $205,000 to credit card customers. The merchandise had cost $102,000. The credit card company charges a 3 percent fee.

5. Collected $650,000 cash from accounts receivalbe

6. Paid $625,000 cash on accounts payable

7. Paid $148,000  cash for selling and administrative expenses

8. Collected cash for the full amount due from the credit card company (see item 4)

9. Loaned $75,000 to J. Parks. The note had an 6 percent interest rate and a one year term to maturity

10. Wrote off $7,800 of accounts as uncollectible

11. Made the following adjusting entries:

a. Recorded uncollectible accounts expense estimated at 1 percent of sales on account

b. recorded seven months of accrued interest on the note at December 31, 2017 (see item 9)

Required:

a. Prepare general journal entries for these transactions, post the entries to T- accounts, and prepare an income statement, a statement of changes in stockholders' equity, a balance sheet, and a statement of cash flow for 2017.

T- accounts

cash                                                           common stock

account receivable                                      sales revenu

allowance for doubful accounts             cost of goods sold

merchandise inventory                            credit card expense

notes receivable                        selling and administrativve expenses

interest receivable                uncollectibel account expense

account payable                 retained earnings

Explanation / Answer

Solution:

Journal Debit Credit 1 Merchandise inventory 595,000 Accounts Payable 595,000 2 Accounts Receivable 920,000 Sales 920,000 3 Cash 260,000 Sales 260,000 4 Accounts Receivable 98,940 Credit Card Expenses                      3,060 Sales 102,000 5 Cash 650,000 Accounts Receivable 650,000 6 Accounts Payable 625,000 Cash 625,000 7 Selling and administrative Expenses 148,000 Cash 148,000 8 Cash 98,940 Accounts Receivable 98,940 9 Notes Receivable 75,000 Cash 75,000 10 Allowance for doubtful accounts 7,800 Accounts Receivable 7,800 11 Uncollectible account Expense 2,622 Accounts Receivable 2,622 12 Interest Receivable 2,625 Interest income 2,625

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