264 Chapter 5 Accounting for Merchandising Businesses Comprehensive Problem 2 8.
ID: 2456180 • Letter: 2
Question
264 Chapter 5 Accounting for Merchandising Businesses Comprehensive Problem 2 8. Net income: $710,760 Ocean Atlantic Co. is a merchandising business. The account balances for Ocean Atlantic Co. as of July 1, 2012 (unless otherwise indicated), are as follows: 110 Cash 112 Accounts Receivable 115Merchandise inventory 116Prepaid Insurance 117 Store Supplies 123Store Equipment 124 AccumulatedDepreciationStore Equipment 210 Accounts Payable 211 Salaries Payable 310 Capital Stock 311 Retained Earnings, August 1, 2011 312 Dividends 313 Income Summary 410 Sales 411Sales Returns and Allowances 412Sales Discounts 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense 523Store Supplies Expense 529 Miscellaneous Selling Expense 530 Office Salaries Expense 531Rent Expense 532Insurance Expense 539 Miscellaneous Administrative Expense 63,600 153,900 602,400 16,800 11,400 469,500 56,700 96,600 75,000 480,300 135,000 3,221,100 92,700 59,400 1,623,000 334,800 81,000 12,600 182,100 83,700 7,800 During July, the last month of the fiscal year, the following transactions were completed: July 1. Paid rent for July, $4,000 3. Purchased merchandise on account from Lingard Co., terms 2/10, n/30, FOB shipping point, $25,000 4. Paid freight on purchase of July 3, $1,000 6. Sold merchandise on account to Holt Co., terms 2/10, n/30, FOB shipping point, $40,000. The cost of the merchandise sold was $24,000 7. Received $18,000 cash from Flatt Co. on account, no discount. 10. Sold merchandise for cash, $90,000. The cost of the merchandise sold was $50,000 13. Paid for merchandise purchased on July 3, less discount. 14. Received merchandise returned on sale of July 6, $7,000. The cost of the merchandise returned was $4,500 15. Paid advertising expense for last half of July, $9,000 16. Received cash from sale of July 6, less return of July 14 and discount. 19, Purchased merchandise for cash, $22,000 19, Paid $23,100 to Carino Co. on account, no discount. Record the following transactions on Page 21 of the journal 20. Sold merchandise on account to Reedley Co., terms 1/10, n/30, FOB shipping point, 40,000. The cost of the merchandise sold was $25,000 21. For the convenience of the customer, paid freight on sale of July 20, $1,100 21. Received $17,600 cash from Owen Co. on account, no discount 21. Purchased merchandise on account from Munson Co., terms 1/10, n/30, FOB destination, $32,000Explanation / Answer
Solution Ocean Atlantic Co.
Adjusted Trial balance
Date
Account Code
Account Title
Debit
Credit
Cash
124040
Accounts Receivable
110320
Merchandise Inventory
565000
Prepaid Insurance
3400
Store Supplies
3900
Store Equipment
469500
Accumulated Depreciation Store equipment
68200
Accounts Payable
73500
Salaries payables
4500
Capital Stock
75000
Retained Earnings
480300
Dividend
13500
Sales
3409850
Sales returns & allowances
111700
Sales Discounts
60460
Cost of Merchandise sold
1736500
Purchase discount
770
Sales salaries Expense
360800
Advertising Expense
90000
Depreciation Expense
11500
Store supplies Expense
9900
Miscellaneous Expense
12600
Office Salaries Expense
198600
Rent Expense
87700
Insurance Expense
13400
Miscellaneous Admin Expense
7800
Total
4,112,120
4,112,120
: Ocean Atlantic Company
Post Closing Trial Balance
Date
Cash
124040
Accounts Receivables
111420
Store supplies
3900
Merchandise Inventory
565000
Prepaid Insurance
3400
Store Equipment
469500
Accumulated Depreciation
68200
Accounts Payable
73500
Salaries payable
4500
Capital
75000
Retained Earnings
1056060
Total
1277260
1277260
Account Code
Account Title
Debit
Credit
Cash
124040
Accounts Receivable
110320
Merchandise Inventory
565000
Prepaid Insurance
3400
Store Supplies
3900
Store Equipment
469500
Accumulated Depreciation Store equipment
68200
Accounts Payable
73500
Salaries payables
4500
Capital Stock
75000
Retained Earnings
480300
Dividend
13500
Sales
3409850
Sales returns & allowances
111700
Sales Discounts
60460
Cost of Merchandise sold
1736500
Purchase discount
770
Sales salaries Expense
360800
Advertising Expense
90000
Depreciation Expense
11500
Store supplies Expense
9900
Miscellaneous Expense
12600
Office Salaries Expense
198600
Rent Expense
87700
Insurance Expense
13400
Miscellaneous Admin Expense
7800
Total
4,112,120
4,112,120
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