xxx Palm-West Products (C) The company\'s monthly operating expenses(organized b

Question

xxx Palm-West Products (C) The company's monthly operating expenses(organized by cost behavior)are provided in Exhibit 2. For simplicity, the company assumes that all operating expenses are paid in cash during the month incurred, with the exception of depreciation and insuranceexpense To simplify, assume no tax Unit Sales Forecasted Sales Volume July August September 12.700 Total 10.200 .956 2244 11.400 8,550 2,850 BASE 3,683 Sales Price BASE 225 372 221 365 PREMIUM 358 155 225 155 15s 225 Unit Cost BASE PREMIUM Variabie Sales commissions% of sales dollars) Shipping &handling;(per unit sold) 5% of sales S15 per unit Fixed per month) 315,000 26,000 9,500 ,300 16,000 38,000 Wages and salaries Utilities Insurance expired Depreciation Ocher S&A; Palm-West Products actual Adiusted Trial Balanec (incompletc), as of July1, is provided in Exhibit 3. July Debit Credit 40,000 2,817,494 1.474,875 15,500 Accounts Receivable Inventory Prepaid Insurance Fixed Assets, net of depreciation Accounts Payable Line-of-Credit Dividends Payable Capital Stock Retained Earnings Sales Revenue Cost of Goods Sold Depreciation Expensc Insurance Expense Rent Expense Sales Commissions Shipping & Handling Utilities Expense Wagcs and Salaries Expensc Other S&A; Expenses Totals 1,464,000 960,053 234,297 1,750,000 2,673,975 Exhikt 3, PW Adusted Trial alinee 1.2 Requirements fin an Excei spreadsheet) . Complete the Unadjusted Trial Balance in Erhibit 3 for 2. Prepare closing entries for Jaly Ju! 3. Prepare a Worksheet for July witk the foliowing coiunns a. Adjusted Trial Balance b. Incoune Statemen e. Balance Shee d. Closing Entries e. Post-Closing Trial Balance

Explanation / Answer

Sales (Units) July Base                   7,956 Premium                   2,244                 10,200 Selling Price Base $225 Premium $372 Sales Value Base $1,790,100 Premium $834,768 $2,624,868 Unit Cost Base $155 Premium $225 Production Cost Base $1,233,180 Premium $504,900 $1,738,080 Sales Commission - 5% $131,244 Shipping & Handling ($15 pu) $153,000 $284,244 Fixed Costs Wages and Salaries $315,000 Rent $26,000 Utilities $9,500 Insurance expired $4,500 Depreciation $16,000 Other S&A $38,000 $409,000 Profit $193,544 1. Trial Balance July Description Debit Credit Cash $40,000 Accounts Receivable $2,817,494 Inventory $1,474,875 Prepaid insurance $15,500 Fixed assets (net) $1,464,000 Accounts Payable $960,053 Line of Credit $234,297 Capital Stock $1,750,000 Retained Earnings $2,673,975 Sales $2,624,868 COGS $1,738,080 Depreciation $16,000 Insurance expired $4,500 Rent $26,000 Sales Commission $131,244 Shipping & Handling $153,000 Utilities $9,500 Wages and Salaries $315,000 Other S&A $38,000 Total $8,243,193 $8,243,193 $0 2. Closing Entries for July Sales A/c Dr $2,624,868 To COGS A/c $1,738,080 To Depreciation A/c $16,000 To Insurance expired A/c $4,500 To Rent A/c $26,000 To Sales Commission A/c $131,244 To Shipping & Handling A/c $153,000 To Utilities A/c $9,500 To Wages and Salaries A/c $315,000 To Other S&A A/c $38,000 To Retained Earnings A/c $193,544 $2,624,868 $2,624,868 3. Income Statement Description July Sales $2,624,868 Cost of Goods Sold $1,738,080 Contribution Margin $886,788 Sales and Administration Expenses $677,244 Depreciation $16,000 Operating Income $193,544 Interest $0 Earnings before taxes $193,544 Taxes $0 Net Income $193,544 4. Balance Sheet 2015 ASSETS Current Assets Cash $40,000 Accounts Receivables $2,817,494 Inventories $1,474,875 Prepaid Insurnace $15,500 Total Current Assets $4,347,869 Fixed assets (net) $1,464,000 Total Assets $5,811,869 LIABILITY AND STOCKHOLDERS EQUITY: Current Liabilities Accounts Payable $960,053 Line of Credit $234,297 Total current liabilities $1,194,350 Total Liabilities $1,194,350 STOCKHOLDER'S EQUITY Common Stock $1,750,000 Retained Earnings $2,867,519 Total Stockholder's Equity $4,617,519 Total Liability and Stockholders Equity $5,811,869 5. Post Closing Trial Balance July Description Debit Credit Cash $40,000 Accounts Receivable $2,817,494 Inventory $1,474,875 Prepaid insurance $15,500 Fixed assets (net) $1,464,000 Accounts Payable $960,053 Line of Credit $234,297 Capital Stock $1,750,000 Retained Earnings $2,867,519 Total $5,811,869 $5,811,869

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