6-6i Comprehensive Problem 2 Palisade Creek Co. is a merchandising business that

Question

6-6i Comprehensive Problem 2

Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2019 (unless otherwise indicated), are as follows:

During May, the last month of the fiscal year, the following transactions were completed:

Instructions

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

6. Journalize and post the adjusting entries. Record the adjusting entries on Page 22 of the journal.

Part 1)

The journal entries are as follows:

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: 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.

Explanation / Answer

Solution:

Income Statement Statement of Retained Earnings Balance Sheet Revenues: Retained Earnings, October 1 $585,300 Assets: Sales $5,316,205 Plus: Net Income $741,855 Cash $84,500 Total Revenue $5,316,205 Subtotal $1,327,155 Accounts Receivable $245,875 Minus: Dividends -$135,000 Inventory $570,000 Expenses: Retained Earnings, October 31 $1,192,155 Estimated returns inventory $50,200 Cost of goods sold $2,991,950 Prepaid Insurance $4,800 Sales salaries expense $727,800 Store supplies $4,000 Advertising expense $292,000 Store equipment $569,500 Miscellaneous selling expense $12,600 Accumulated depreciation-store equipment -$70,700 Office salaries expense $417,700 Total assets $1,458,175 Rent expense $88,700 Liabilities and Stockholders' Equity Store supplies expense $9,800 Liabilities: Depreciation expense $14,000 Customer refunds payable $89,270 Miscellaneous administrative expense $7,800 Accounts payable $63,150 Insurance expense $12,000 Salaries payable $13,600 Total expenses $4,574,350 Total Liabilities $166,020 Stockholders' Equity: Net Income $741,855 Common Stock $100,000 Miscellaneous administrative expense $7,800 Retained Earnings $1,192,155 Insurance expense $12,000 Total Stockholders' Equity $1,292,155

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