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.

Description	Post. Ref.	Debit	Credit
Rent Expense
Cash

May 3: Purchased merchandise on account from Martin Co., terms 2/10, n/30, FOB shipping point, $36,000.

Description	Post. Ref.	Debit	Credit

May 4: Paid freight on purchase of May 3, $600.

Description	Post. Ref.	Debit	Credit

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.

Description	Post. Ref.	Debit	Credit

May 7: Received $22,300 cash from Halstad Co. on account.

Description	Post. Ref.	Debit	Credit

May 10: Sold merchandise for cash, $54,000. The cost of the merchandise sold was $32,000.

Description	Post. Ref.	Debit	Credit

May 13: Paid for merchandise purchased on May 3.

Description	Post. Ref.	Debit	Credit

May 15: Paid advertising expense for last half of May, $11,000.

Description	Post. Ref.	Debit	Credit

May 16: Received cash from sale of May 6.

Description	Post. Ref.	Debit	Credit

May 19: Purchased merchandise for cash, $18,700.

Description	Post. Ref.	Debit	Credit

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

Description	Post. Ref.	Debit	Credit

May 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.

Description	Post. Ref.	Debit	Credit

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.

Description	Post. Ref.	Debit	Credit

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

Description	Post. Ref.	Debit	Credit

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

Description	Post. Ref.	Debit	Credit

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

Description	Post. Ref.	Debit	Credit

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

Description	Post. Ref.	Debit	Credit

May 26: Refunded cash on sales made for cash, $7,500. The cost of the merchandise returned was $4,800.

Description	Post. Ref.	Debit	Credit

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

Description	Post. Ref.	Debit	Credit

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

Description	Post. Ref.	Debit	Credit

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.

Description	Post. Ref.	Debit	Credit

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

Description	Post. Ref.	Debit	Credit

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

Description	Post. Ref.	Debit	Credit

2.

Comprehensive Problem 2

Part 3:

NOTE: You must complete parts 1 and 2 before completing 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, 2016
	Debit	Credit
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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S No	Date	Account	Debit	Credit
1	May 1	Rent Expense	$            5,000
1	May 1	Cash		$            5,000
		(Being Rent Paid)
2	May 3	Merchandise Inventory	$         36,000
2	May 3	Accounts Payable		$         36,000
		(being inventory purchased)
3	May 4	Merchandise Inventory	$               600
3	May 4	Cash		$               600
		(Freight Paid)
4	May 6	Accounts Receivable	$         68,500
4	May 6	Sales		$         68,500
		(being Sales done)
5	May 6	Cost of Merchandise Sold	$         41,000
5	May 6	Merchandise Inventory		$         41,000
		(COGS of sales)
6	May 7	Cash	$         22,300
6	May 7	Accounts Receivable		$         22,300
		(being advance received)
7	May 10	Cash	$         54,000
7	May 10	Sales		$         54,000
		(Cash Sale)
8	May 10	Cost of Merchandise Sold	$         32,000
8	May 10	Merchandise Inventory		$         32,000
		(COGS)
9	May 13	Accounts Payable	$         36,000
9	May 13	Cash		$         35,280
9	May 13	Merchandise Inventory		$               720
		(payment done after taking discount)
10	May 15	Advertising Expense	$         11,000
10	May 15	Cash		$         11,000
11	May 16	Cash	$         67,130
11	May 16	Sales Discount	$            1,370
11	May 16	Accounts Receivable		$         68,500
		(Cash received after discount)
12	May 19	Merchandise Inventory	$         18,700
12	May 19	Cash		$         18,700
		(Inventory purchased)
13	May 19	Accounts Payable	$         33,450
13	May 19	Cash		$         33,450
		(Paid on account to Button and co)
14	May 20	Estimated Return of Inventory	$         13,230
14	May 20	Cash		$         13,230
15	May 20	Merchandise Inventory	$            8,000
15	May 20	Cost of Merchandise Sold		$            8,000
16	May 20	Accounts Receivable	$       110,000
16	May 20	Sales		$       110,000
17	May 20	Cost of Merchandise Sold	$         70,000
17	May 20	Merchandise Inventory		$         70,000
18	May 21	Accounts Receivable	$            2,300
18	May 21	Cash		$            2,300
19	May 21	Cash	$         42,900
19	May 21	Accounts Receivable		$         42,900
20	May 21	Merchandise Inventory	$         88,000
20	May 21	Accounts Payable		$         88,000
21	May 24	Accounts Payable	$            5,000
21	May 24	Merchandise Inventory		$            5,000
22	May 26	Estimated Return of Inventory	$            7,500
22	May 26	Cash		$            7,500
23	May 26	Merchandise Inventory	$            4,800
23	May 26	Cost of Merchandise Sold		$            4,800
24	May 28	Sales Salaries Expense	$         56,000
24	May 28	Office Salaries Expense	$         29,000
24	May 28	Cash		$         85,000
25	May 28	Store Supplies	$            2,400
25	May 28	Cash		$            2,400
26	May 30	Accounts Receivable	$         78,750
26	May 30	Sales		$         78,750
27	May 30	Cost of Merchandise Sold	$         47,000
27	May 30	Merchandise Inventory		$         47,000
28	May 30	Sales Discount	$            1,100
28	May 30	Cash	$       111,200
28	May 30	Accounts Receivable		$       112,300
29	May 31	Accounts Payable	$         83,000
29	May 31	Cash		$         82,170
29	May 31	Merchandise Inventory		$               830

	Beginning		Transaction		Unadjusted
Unadjusted Trial Balance	Debit	Credit	Debit	Credit	Debit	Credit
Cash	83,600		900	0	84,500
Accounts Receivable	233,900		13550	0	247,450
Merchandise Inventory	624,400		0	40450	583,950
Estimated Returns Inventory	28,000		20730	0	48,730
Prepaid Insurance	16,800		0	0	16,800
Store Supplies	11,400		2400	0	13,800
Store Equipment	569,500		0	0	569,500
Accumulated Depreciation-Store Equipment		56,700	0	0		56,700
Accounts Payable		96,600	33450	0		63,150
Salaries Payable		0	0	0		0
Customers Refunds Payable		50,000	0	0		50,000
Common Stock			0	0		0
Capital		685,300	0	0		685,300
Drawing	135,000		0	0	135,000
Income Summary	0		0	0	0
Sales		5,069,000	0	311250		5,380,250
Sales Return and Allowance			0		0
Sales Discount			2470		2,470
Cost of Merchandise Sold	2,823,000		177200	0	3,000,200
Sales Salaries Expense	664,800		56000	0	720,800
Advertising Expense	281,000		11000	0	292,000
Depreciation Expense	0		0	0	0
Store Supplies Expense	0		0	0	0
Miscellaneous Selling Expense	12,600		0	0	12,600
Office Salaries Expense	382,100		29000	0	411,100
Rent Expense	83,700		5000	0	88,700
Insurance Expense	0		0	0	0
Miscellaneous Administrative Expense	7,800		0	0	7,800
	5,957,600	5,957,600	351,700	351,700	6,235,400	6,235,400