Question

Comprehensive Problem 2

Part 1 and Part 2:

Palisade Creek Co. is a merchandising business. 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	Lynn Tolley, Capital, June 1, 2015	685,300
311	Lynn Tolley, Drawing	135,000
312	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

Part 1: Using the attached spreadsheet, enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark (√) in the Posting Reference column. Journalize the transactions for May, the last month of the fiscal year, below.

Part 2: Post the journal to the general ledger you created in Part 1, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers.

For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".

May 1: Paid rent for May, $5,000.

Comprehensive Problem 2
Part 4 and 6:

Note: You must complete parts 1, 2 and 3 before attempting to complete part 4 and part 6. Part 5 is an optional work sheet.

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

a.	Merchandise inventory on May 31			$570,000
b.	Insurance expired during the year			12,000
c.	Store supplies on hand on May 31			4,000
d.	Depreciation for the current year			14,000
e.	Accrued salaries on May 31:
	Sales salaries	$7,000
	Office salaries	6,600	13,600
f.	The adjustment for customer returns and allowances is $60,000 for sales and $35,000 for cost of merchandise sold.

6. Journalize the adjusting entries. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Post the adjusting entries to the attached spreadsheet you used in parts 1 and 2.

Date	Description	Post. Ref.	Debit	Credit
	Adjusting Entries
2016
May 31
May 31
May 31
May 31
May 31
May 31
May 31

Comprehensive Problem 2

Part 7:

You must complete parts 1, 2, 3, 4 and 6 before completing part 7. Part 5 is the optional work sheet.

Prepare an adjusted trial balance. If an amount box does not require an entry, leave it blank or enter "0".

Palisade Creek Co. Adjusted Trial Balance May 31, 2016
	Debit Balances	Credit Balances
Cash
Accounts Receivable
Merchandise Inventory
Estimated Returns Inventory
Prepaid Insurance
Store Supplies
Store Equipment
Accumulated Depreciation—Store Equipment
Accounts Payable
Salaries Payable
Customers Refunds Payable
Lynn Tolley, Capital
Lynn Tolley, Drawing
Sales
Cost of Merchandise Sold
Sales Salaries Expense
Advertising Expense
Depreciation Expense
Store Supplies Expense
Miscellaneous Selling Expense
Office Salaries Expense
Rent Expense
Insurance Expense
Miscellaneous Administrative Expense

Answer 1

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		Adjusting
	May 31	Cost of Merchandise Sold	$         13,950
	May 31	Merchandise Inventory		$         13,950
	May 31	Insurance Expense	$         12,000
	May 31	Prepaid Insurance		$         12,000
	May 31	Store Supplies Expense	$            9,800
	May 31	Store supplies		$            9,800
	May 31	Depreciation Expense-Store Equipment	$         14,000
	May 31	Accumulated Depreciation-Store Equipment		$         14,000
	May 31	Sales Salaries Expense	$            7,000
	May 31	Office Salaries Expense	$            6,600
	May 31	Salaries Payable		$         13,600
	May 31	Depreciation Expense-Store Equipment	$         14,000
	May 31	Accumulated Depreciation-Store Equipment		$         14,000
	May 31	Sales	$         60,000
	May 31	Customers Refund Payable		$         60,000
	May 31	Estimated Returns Inventory	$         25,000
	May 31	Cost of Merchandise Sold		$         25,000

	Beginning		Transaction		Unadjusted		Adjusted Entries		Adjusted
Unadjusted Trial Balance	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$         83,600		$           900	$                -	$                               84,500				$             84,500
Accounts Receivable	$        233,900		$     12,550	$                -	$                            246,450				$           246,450
Merchandise Inventory	$        624,400		$              -	$      40,450	$                            583,950			$         13,950	$           570,000
Estimated Returns Inventory	$         28,000		$              -	$      12,800	$                               15,200		$         35,000		$             50,200
Prepaid Insurance	$         16,800		$              -	$                -	$                               16,800			$         12,000	$                4,800
Store Supplies	$         11,400		$       2,400	$                -	$                               13,800			$            9,800	$                4,000
Store Equipment	$        569,500		$              -	$                -	$                            569,500				$           569,500
Accumulated Depreciation-Store Equipment		$         56,700	$              -	$                -		$             56,700		$         14,000		$             70,700
Accounts Payable		$         96,600	$     33,450	$                -		$             63,150				$             63,150
Salaries Payable		$                -	$              -	$                -		$                       -		$         13,600		$             13,600
Customers Refunds Payable		$         50,000	$     20,730	$                -		$             29,270		$         60,000		$             89,270
Lynn Tolley, Capital		$        685,300	$              -	$                -		$           685,300			$                       -	$           685,300
Lynn Tolley, Drawing	$        135,000		$              -	$                -	$                            135,000				$           135,000
Income Summary	$                -		$              -	$                -	$                                        -					$                       -
Sales		$     5,069,000	$              -	$    311,250		$       5,380,250	$         60,000			$       5,320,250
Sales Return and Allowance			$     20,730		$                               20,730				$             20,730
Sales Discount			$       3,470		$                                 3,470				$                3,470
Cost of Merchandise Sold	$     2,823,000		$   177,200	$                -	$                         3,000,200		$         13,950	$         35,000	$       2,979,150
Sales Salaries Expense	$        664,800		$     56,000	$                -	$                            720,800		$            7,000		$           727,800
Advertising Expense	$        281,000		$     11,000	$                -	$                            292,000				$           292,000
Depreciation Expense	$                -		$              -	$                -	$                                        -		$         14,000		$             14,000
Store Supplies Expense	$                -		$              -	$                -	$                                        -		$            9,800		$                9,800
Miscellaneous Selling Expense	$         12,600		$              -	$                -	$                               12,600				$             12,600
Office Salaries Expense	$        382,100		$     29,000	$                -	$                            411,100		$            6,600		$           417,700
Rent Expense	$         83,700		$       5,000	$                -	$                               88,700				$             88,700
Insurance Expense	$                -		$              -	$                -	$                                        -		$         12,000		$             12,000
Miscellaneous Administrative Expense	$           7,800		$              -	$                -	$                                 7,800				$                7,800
	$       5,957,600	$       5,957,600	$   372,430	$    364,500	$                         6,222,600	$       6,214,670	$       158,350	$       158,350	$       6,250,200	$       6,242,270