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

ID: 2454721 • Letter: P

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

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 Common Stock 100,000

311 Retained Earnings 585,300

312 Dividends 135,000

313 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 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.

At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6). Journalize these adjusting entries.

The adjustment for customer returns and allowances is $60,000 for sales and $35,000 for cost of merchandise sold.

Merchandise inventory on May 31, $570,000Insurance expired during the year, $12,000Store supplies on hand on May 31, $4,000Depreciation for the current year, $14,000Accrued 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.

Prepare an unadjusted and an adjusted trial balance. 8. Prepare A. An income statement.** B. A retained earnings statement.** C. A balance sheet.**

Explanation / Answer

The adjusting entries are as follows: Date Account titles and explanation Debit Credit 1 Closing stock 570000 Profit and loss a/c 570000 (To record the closing stock) 2 Insurance expense 12000 Prepaidinsurance 12000 (To record the insurance expense) 3 Store supply expense 7400 Store supplies 7400 (To record the consumption of stores) 4 Depreciation 14000 Asset 14000 (To record the depreciation expense) 5 Salaries 13600 Salary payable 13600 (To record the salary expense) Prepare an unadjusted trial balance. 1-May-2016 Cr No Particulars Amount Particulars Amount Cash             83,600 Accumulated Depreciation-Store Equipment            56,700 Accounts Receivable           233,900 Customers Refunds Payable            50,000 Merchandise Inventory           624,400 Common Stock          100,000 Prepaid Insurance             16,800 Retained Earnings          585,300 Store Supplies             11,400 Sales       5,069,000 Store Equipment           569,500 Accounts Payable             96,600 Dividends           135,000 Cost of Merchandise Sold        2,823,000 Sales Salaries Expense           664,800 Advertising Expense           281,000 Miscellaneous Selling Expense             12,600 Office Salaries Expense           382,100 Rent Expense             83,700 Miscellaneous Administrative Expense               7,800        6,026,200       5,861,000 Note:- Estimated Return on investment is not show on the tradebalance Prepare an adjusted trial balance. 1-May-2016 Cr Particulars Amount Particulars Amount Cash             83,600 Accumulated Depreciation-Store Equipment            56,700 Accounts Receivable           233,900 Customers Refunds Payable            50,000 Merchandise Inventory           624,400 Common Stock          100,000 Prepaid Insurance             16,800 Retained Earnings          585,300 Store Supplies             11,400 Sales       5,069,000 Store Equipment           569,500 Suspenses Account          165,200 Accounts Payable             96,600 Dividends           135,000 Cost of Merchandise Sold        2,823,000 Sales Salaries Expense           664,800 Advertising Expense           281,000 Miscellaneous Selling Expense             12,600 Office Salaries Expense           382,100 Rent Expense             83,700 Miscellaneous Administrative Expense               7,800        6,026,200       6,026,200 Prepare An income statement. Income Statement for month of 1-May-2016 Particulars Amount Particulars Amount Cost of Merchandise Sold        2,823,000 Sales       5,069,000 Sales Salaries Expense           664,800 Advertising Expense           281,000 Miscellaneous Selling Expense             12,600 Office Salaries Expense           382,100 Rent Expense             83,700 Miscellaneous Administrative Expense               7,800 Dividends           135,000 Net income           679,000        5,069,000       5,069,000 A retained earnings statement. Common Stock           100,000 Retained Earnings           585,300 A Net income 679000 B Total Retain earning account        1,264,300 A+B