Question

Part 1 and Part 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, 20Y7 (unless otherwise indicated), are as follows:

110	Cash	$83,600
112	Accounts Receivable	233,900
115	Merchandise Inventory	652,400
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	Customer Refunds Payable	50,000
212	Salaries Payable	—
310	Lynn Tolley, Capital, June 1, 20Y6	685,300
311	Lynn Tolley, Drawing	135,000
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, 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.

May 1: Paid rent for May, $5,000.
May 3: Purchased merchandise on account from Martin Co., terms 2/10, n/30, FOB shipping point, $36,000.
May 4: Paid freight on purchase of May 3, $600.
May 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.
May 7: Received $22,300 cash from Halstad Co. on account.
May 10: Sold merchandise for cash, $54,000. The cost of the merchandise sold was $32,000.

May 13: Paid for merchandise purchased on May 3.
May 15: Paid advertising expense for last half of May, $11,000.

May 16: Received cash from sale of May 6.
May 19: Purchased merchandise for cash, $18,700.

May 19: Paid $33,450 to Buttons Co. on account.

May 20: Paid Korman Co. a cash refund of $5,000 for damaged merchandise from sale of May 6. Korman Co. kept the merchandise.

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.

May 21: For the convenience of Crescent Co., paid freight on sale of May 20, $2,300.

May 21: Received $42,900 cash from Gee Co. on account.

May 21: Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB destination, $88,000.

May 24: Returned damaged merchandise purchased on May 21, receiving a credit memo from the seller for $5,000.

May 26: Refunded cash on sales made for cash, $800. The defective merchandise was not returned by the customer.

May 28: Paid sales salaries of $56,000 and office salaries of $29,000.

May 29: Purchased store supplies for cash, $2,400.

May 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.

May 30: Received cash from sale of May 20 plus freight paid on May 21.

May 31: Paid for purchase of May 21, less return of May 24.

Part 3:

Prepare an unadjusted trial balance. If an amount box does not require an entry, leave it blank.

Palisade Creek Co. Unadjusted Trial Balance May 31, 20Y7
	Debit Balances	Credit Balances
Cash
Accounts Receivable
Merchandise Inventory
Prepaid Insurance
Store Supplies
Store Equipment
Accumulated Depreciation—Store Equipment
Accounts Payable
Customer Refunds Payable
Salaries 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

total   _____________ ______________

Answer 1

Answer:

working

Account: Cash    Account No. 110

Date	Item	Post. Ref.	Debit	Credit	Balance
Debit	Credit
20Y7
May	1	Balance	V			83,600
	1		20		5,000
	4		20		600
	7		20	22,300
	10		20	54,000
	13		20		35,280
	15		20		11,000
	16		20	67,130[$68,500 - ($68,500 x 2%)]
	19		20		18,700
	19		20		33,450
	20		20		13,230[$13,500 - ($13,500 x 2%)]
	21		21		2,300
	21		21	42,900
	26		21		7,500
	28		21		85,000
	29		21		2,400
	30		21	111,200
	31		21		82,170($87,120 - $4,950)	84,500

Account:   Accounts Receivable Account No. 112

Date	Item	Post. Ref.	Debit	Credit	Balance
Debit	Credit
20Y7
May	1	Balance	V			233,900
	6		20	67,130
	7		20		22,300
	16		20		67,130
	20		21	108,900 [$110,000 - ($110,000 x 1%)
	21		21	2,300
	21		21		42,900
	30		21	77,175 [$78,750 - ($78,750 x 2%)]
	30		21		111,200	245,875

Account:   Merchandise Inventory   Account No.  115

Date	Item	Post. Ref.	Debit	Credit	Balance
Debit	Credit
20Y7
May	1	Balance	V			624,400
	3		20	35,280
	4		20	600
	6		20		41,000
	10		20		32,000
	19		20	18,700
	20		20	8,000
	20		21		70,000
	21		21	87,120[$88,000 - ($88,000 x 1%)]
	24		21		4,950
	26		21	4,800
	30		21		47,000	583,950
	31	Adjusting	22		13,950	570,000

Account:   Estimated Returns Inventory___________________ Account No._____ 116 Date Item Post. Ref. Debit Credit Balance Debit Credit 20Y7 May 1 Balance V 28,000 20 20 8,000 26 21 4,800 15,200 31 Adjusting 22 35,000 50,200

Account: Prepaid Insurance___________________________ Account No._____ 117 Post. Balance Date Item Ref. Debit Credit Debit Credit 20Y7 May 1 Balance V 16,800 31 Adjusting 22 12,000 4,800

Account: Store Supplies_______________________________ Account No._____ 118 Date Item Post. Ref. Debit Credit Balance Debit Credit 20Y7 May 1 Balance V 11,400 29 21 2,400 13,800 31 Adjusting 22 9,800 4,000

Account: Store Equipment   Account No.   123

			Post.			Balance
Date	Item	Ref.	Debit	Credit	Debit	Credit
20Y7
May	1	Balance				569,500

Account:   Accumulated Depreciation—Store Equipment   Account No.   124 Post. Balance Date Item Ref. Debit Credit Debit Credit 20Y7 May 1 Balance ✓ 56,700 31 Adjusting 22 14,000 70,700

Account: Accounts Payable   Account No. 210 Date Item Post. Ref. Debit Credit Balance Debit Credit 20Y7 May 1 Balance ✓ 96,600 3 20 35,280 13 20 35,280 19 20 33,450 21 21 87,120 24 21 4,950 31 21 82,170 63,150

Account: Customer Refunds Payable___________________ Account No.____ 211 Date Item Post. Ref. Debit Credit Balance Debit Credit 20Y7 May 1 Balance ✓ 50,000 20 20 13,230 26 21 7,500 29,270 31 Adjusting 22 60,000 89,270

Account: Salaries Payable Account No. 212 Post. Balance Date Item Ref. Debit Credit Debit Credit 20Y7 May 31 Adjusting 22 13,600 13,600

Account: Lynn Tolley, Capital Account No.   310

Date	Item	Post. Ref.	Debit	Credit	Balance
Debit	Credit
20Y6
June	1	Balance	✓				685,300
20Y7
May	31	Closing	23		741,855
	31	Closing	23	135,000			1,292,155

Account: Lynn Tolley, Drawing________________________ Account No._____ 311 Post. Balance Date Item Ref. Debit Credit Debit Credit 20Y7 May 1 Balance ✓ 135,000 31 Closing 23 135,000 — —

Account: Sales   Account No. 410 Date Item Post. Ref. Debit Credit Balance Debit Credit 20Y7 May 1 Balance ✓ 5,069,000 6 20 67,130 10 20 54,000 20 21 108,900 30 21 77,175 [$78,750 - ($78,750 x 2%)] 5,376,205 31 Adjusting 22 60,000 5,316,205 31 Closing 23 5,316,205 — —

Account:   Cost of Merchandise Sold Account No.   510

Date	Item	Post. Ref.	Debit	Credit	Balance
Debit	Credit
20Y7
May	1	Balance	✓			2,823,000
	6		20	41,000
	10		20	32,000
	20		21	70,000
	30		21	47,000		3,013,000
	31	Adjusting	22	13,950
	31	Adjusting	22		35,000	2,991,950
	31	Closing	23		2,991,950	—	—

requirement

PALISADE CREEK CO. Unadjusted Trial Balance May 31, 20Y7
	Account	Debit	Credit
	No.	Balances	Balances
Cash	110	84,500
Accounts Receivable	112	245,875
Merchandise Inventory	115	583,950
Estimated Returns Inventory	116	15,200
Prepaid Insurance	117	16,800
Store Supplies	118	13,800
Store Equipment	123	569,500
Accumulated Depreciation—Store Equipment	124		56,700
Accounts Payable	210		63,150
Customer Refunds Payable	211		29,270
Salaries Payable	212		—
Lynn Tolley, Capital	310		685,300
Lynn Tolley, Drawing	311	135,000
Sales	410		5,376,205
Cost of Merchandise Sold	510	3,013,000
Sales Salaries Expense	520	720,800
Advertising Expense	521	292,000
Depreciation Expense	522	—
Store Supplies Expense	523	—
Miscellaneous Selling Expense	529	12,600
Office Salaries Expense	530	411,100
Rent Expense	531	88,700
Insurance Expense	532	—
Miscellaneous Administrative Expense	539	7,800
		6,210,625	6,210,625