Question

Palisade Creek Co. is a retail business that uses the perpetual inventory system. The account balances for Palisade Creek as of May 1, 20Y6 (unless otherwise indicated), are as follows. Assume all accounts have normal balances.

110		Cash	$83,600			312		Dividends	$135,000
112		Accounts Receivable	233,900			410		Sales	5,069,000
115		Inventory	624,400			510		Cost of Goods Sold	2,823,000
116		Estimated Returns Inventory	28,000			520		Sales Salaries Expense	664,800
117		Prepaid Insurance	16,800			521		Advertising Expense	281,000
118		Store Supplies	11,400			522		Depreciation Expense	—
123		Store Equipment	569,500			523		Store Supplies Expense	—
124		Accumulated Depreciation—Store Equipment	56,700			529		Miscellaneous Selling Expense	12,600
210		Accounts Payable	96,600			530		Office Salaries Expense	382,100
211		Salaries Payable	—			531		Rent Expense	83,700
212		Customers Refunds Payable	50,000			532		Insurance Expense	—
310		Common Stock	100,000			539		Miscellaneous Administrative Expense	7,800
311		Retained Earnings	585,300			539

Part 1: Journalize the transactions below for May, the last month of the fiscal year. If an amount box does not require an entry, leave it blank.

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

Date	Description	Post. Ref.	Debit	Credit
May 1

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

Date	Description	Post. Ref.	Debit	Credit
May 3

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

Date	Description	Post. Ref.	Debit	Credit
May 4

May 6: Sold merchandise on account to Korman Co., terms 2/10, n/30, FOB shipping point, $68,500. The cost of the goods sold was $41,000.

Date	Description	Post. Ref.	Debit	Credit
May 6-Sales
May 6-Cost

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

Date	Description	Post. Ref.	Debit	Credit
May 7

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

Date	Description	Post. Ref.	Debit	Credit
May 10-Sales
May 10-Cost

May 13: Paid for merchandise purchased on May 3.

Date	Description	Post. Ref.	Debit	Credit
May 13

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

Date	Description	Post. Ref.	Debit	Credit
May 15

May 16: Received cash from sale of May 6.

Date	Description	Post. Ref.	Debit	Credit
May 16

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

Date	Description	Post. Ref.	Debit	Credit
May 19

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

Date	Description	Post. Ref.	Debit	Credit
May 19

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.

Date	Description	Post. Ref.	Debit	Credit
May 20-Refund
May 20-Cost

May 20: Sold merchandise on account to Crescent Co., terms 1/10, n/30, FOB shipping point, $110,000. The cost of the goods sold was $70,000.

Date	Description	Post. Ref.	Debit	Credit
May 20-Sales
May 20-Cost

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

Date	Description	Post. Ref.	Debit	Credit
May 21

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

Date	Description	Post. Ref.	Debit	Credit
May 21

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

Date	Description	Post. Ref.	Debit	Credit
May 21

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

Date	Description	Post. Ref.	Debit	Credit
May 24

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

Date	Description	Post. Ref.	Debit	Credit
May 26-Refund
May 26-Cost

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

Date	Description	Post. Ref.	Debit	Credit
May 28

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

Date	Description	Post. Ref.	Debit	Credit
May 29

May 30: Sold merchandise on account to Turner Co., terms 2/10, n/30, FOB shipping point, $78,750. The cost of the goods sold was $47,000.

Date	Description	Post. Ref.	Debit	Credit
May 30-Sales
May 30-Cost

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

Date	Description	Post. Ref.	Debit	Credit
May 30

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

Date	Description	Post. Ref.	Debit	Credit
May 31

Part 2: Using the attached spreadsheet, post the journal entries from Part 1 to the general ledger. Extend 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.

Answer 1

Cost of Goods Sold A/c
Date	Particulars	Amount	Date	Particulars	Amount
May 6,2016	To Inventory A/c	41,000	May 30,2016	By Profit & Loss A/c	190000
May 10,2016	To Inventory A/c	32,000
May 20,2016	To Inventory A/c	70,000
May 30,2016	To Inventory A/c	47,000
		1,90,000			1,90,000
Sales A/c
Date	Particulars	Amount	Date	Particulars	Amount
May 30,2016	To Profit & Loss A/c	3,33,550	May 6,2016	By Accounts ReceivableA/c	68500
			May 7,2016	By Cash A/c	22300
			May 10,2016	By Cash A/c	54000
			May 20,2016	By Accounts ReceivableA/c	110000
			May 30,2016	By Accounts ReceivableA/c	78750
		3,33,550			3,33,550
Advertising Expense A/c
Date	Particulars	Amount	Date	Particulars	Amount
May 13,2016	To Cash A/c	11000	May 30,2016	By Profit & Loss A/c	11000
		11000			11,000
Sales Salaries Expense A/c
Date	Particulars	Amount	Date	Particulars	Amount
May 28,2016	To Cash A/c	56000	May 30,2016	By Profit & Loss A/c	56000
		56000			56,000
Office Salaries Expense A/c
Date	Particulars	Amount	Date	Particulars	Amount
May 28,2016	To Cash A/c	29000	May 30,2016	By Profit & Loss A/c	29000
		29000			29,000
Store Supplies A/c
Date	Particulars	Amount	Date	Particulars	Amount
May 29,2016	To Cash A/c	2400	May 30,2016	By bal c/d	2400
		2400			2,400