Question

COMPREHENSIVE PROBLEM

World Boards Co. is a merchandising business. The account balances for the company as of December 1 2010 are as follows:

110 cash $ 21,200

112 accounts receivable 51,300

115 inventory 200,800

116 prepaid insurance 5,600

117 store supplies 3,800

123 store equipment 156,500

124 accumulated depreciation – equipment 18,900

210 accounts payable 32,200

211 salaries payable ----

310 common stock 85,100

311 retained earnings 100,000

312 dividends 45,000

313 income summary -------

410 sales 1,073,700

411 sales returns and allowances 30,900

412 sales discounts 19,800

510 cost of goods sold 541,000

520 sales salaries expense 111,600

521 advertising expense 27,000

522 depreciation expense -----

523 store supplies expense -----

529 miscellaneous selling expense 4,200

530 office salaries expense 60,700

531 rent expense 27,900

532 insurance expense ---- -

539 miscellaneous administrative expense 2,600

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

1. Paid rent for the month of December, $2,400.

3. Purchased inventory on account from Huisman Co., terms 2/10,n/30, FOB shipping point, $21,600.

4. Paid transportation charges on the Dec. 3rd purchase, 500.

6. Sold inventory on account to Hillcrest Co. terms 2/10,n/30, FOB shipping point, $8,500. The cost was $5,000

7. Received $8,900 cash from Foley Co. on account, no discount.

10. Sold inventory for cash, $27,200. The cost was $16,000.

13. Paid for the inventory purchased on Dec. 3rd less discount.

14. Received inventory returned from the sale of Dec. 6th, $1,500. The cost was $900.

15. Paid advertising expense for the last half of December, $2,600.

16. Received cash from the sale of December 6th less return and discount.

19. Purchased inventory for cash, $11,800.

19 Paid $9,000 to Bakke Co. on account, no discount..

20. Sold inventory on account to Wilts Co. terms 1/10,n/30, FOB shipping point, $22,300, the cost was $13,200.

21. For the convenience of the customer, paid shipping charges on sale of Dec. 20th, $1,100.

21. Received $17,600 cash from Owen Co. on account, no discount.

21. Purchased inventory on account from Nye Co., terms 1/10,n/30, FOB destination, $19,900.

24. Returned $2,000 of inventory purchased on Dec. 21st. receiving credit from the seller.

26. Refunded cash on a cash sale, $1,200. The cost of the inventory was $700.

28. Paid sales salaries of $7,600 and office salaries of $4,800.

29. Purchased store supplies for cash, $800.

30. Sold inventory on account to Whitetail Co. terms 2/10,n/30, FOB shipping point, $18,750. The cost was $11,250

30. Received cash from sale of December 20, less discount, plus shipping charges paid on Dec. 21st

31. Paid for purchase of December 21, less return of December 24 and discount.

ADJUSTMENT DATA:

Inventory on hand on December 31 $196,139

Insurance expired during the year 1,875

Store supplies on hand on Dec. 31st. 1,500

Depreciation for the year 9,500

Accrued salaries on Dec. 31.

Sales salaries $1,200

Office salaries 800 2,000

INSTRUCTIONS

Open a ledger with the accounts given to you in the trial balance. Insert your beginning balances.

Journalize the December transactions and post to the ledger.

Using a 10 column worksheet, prepare a trial balance.

Using the above adjustment data, complete the adjustment columns on the worksheet.

Complete the remainder of the worksheet

Using the worksheet, prepare an income statement, a retained earnings statement, and a balance sheet.

Journalize and post your adjustment entries to the ledger.

Journalize and post your closing entries to the ledger.

Prepare a post-closing trial balance.

What to turn in for a grade

Please turn in your worksheet, your 3 financial statements, and your post-closing trial balance only.

Answer 1

S No	Date	Account	Debit	Credit
1	Dec 1	Rent Expense	2400
1	Dec 1	Cash		2400
		(Being Rent Paid)
2	Dec 3	Merchandise Inventory	21600
2	Dec 3	Accounts Payable		21600
		(being inventory purchased)
3	Dec 4	Merchandise Inventory	500
3	Dec 4	Cash		500
		(Freight Paid)
4	Dec 6	Accounts Receivable	8500
4	Dec 6	Sales		8500
		(being Sales done)
5	Dec 6	Cost of Merchandise Sold	5000
5	Dec 6	Merchandise Inventory		5000
		(COGS of sales)
6	Dec 7	Cash	8900
6	Dec 7	Accounts Receivable		8900
		(being advance received)
7	Dec 10	Cash	27200
7	Dec 10	Sales		27200
		(Cash Sale)
8	Dec 10	Cost of Merchandise Sold	16000
8	Dec 10	Merchandise Inventory		16000
		(COGS)
9	Dec 13	Accounts Payable	21600
9	Dec 13	Cash		21168	21600*98%
9	Dec 13	Merchandise Inventory		432	2% Discount
		(payment done after taking discount)
10	Dec 14	Sales Return and Allowance	1500
10	Dec 14	Accounts Receivable		1500
11	Dec 14	Merchandise Inventory	900
11	Dec 14	Cost of Merchandise Sold		900
10	Dec 15	Advertising Expense	2600
10	Dec 15	Cash		2600
11	Dec 16	Cash	6860
11	Dec 16	Sales Discount	140		2% discount
11	Dec 16	Accounts Receivable		7000	8500-1500
		(Cash received after discount)
12	Dec 19	Merchandise Inventory	11800
12	Dec 19	Cash		11800
		(Inventory purchased)
13	Dec 19	Accounts Payable	9000
13	Dec 19	Cash		9000
		(Paid on account to Button and co)
16	Dec 20	Accounts Receivable	22300
16	Dec 20	Sales		22300
17	Dec 20	Cost of Merchandise Sold	13200
17	Dec 20	Merchandise Inventory		13200
18	Dec 21	Accounts Receivable	1100
18	Dec 21	Cash		1100
19	Dec 21	Cash	17600
19	Dec 21	Accounts Receivable		17600
20	Dec 21	Merchandise Inventory	19900
20	Dec 21	Accounts Payable		19900
21	Dec 24	Accounts Payable	2000
21	Dec 24	Merchandise Inventory		2000
22	Dec 26	Sales Return and Allowance	1200
22	Dec 26	Cash		1200
23	Dec 26	Merchandise Inventory	700
23	Dec 26	Cost of Merchandise Sold		700
24	Dec 28	Sales Salaries Expense	7600
24	Dec 28	Office Salaries Expense	4800
24	Dec 28	Cash		12400
25	Dec 28	Store Supplies	800
25	Dec 28	Cash		800
26	Dec 30	Accounts Receivable	18750
26	Dec 30	Sales		18750
27	Dec 30	Cost of Merchandise Sold	11250
27	Dec 30	Merchandise Inventory		11250
28	Dec 30	Sales Discount	223		22300*1%
28	Dec 30	Cash	23177		(22300*99%)+1100
28	Dec 30	Accounts Receivable		23400
29	Dec 31	Accounts Payable	17900
29	Dec 31	Cash		17721	17900*99%
29	Dec 31	Merchandise Inventory		179	17900*1%
		Adjusting Entries
1	Dec 31	Cost of Merchandise Sold	12000
1	Dec 31	Merchandise Inventory		12000
2	Dec 31	Insurance Expense	1875
2	Dec 31	Prepaid Insurance		1875
3	Dec 31	Store Supplies Expense	3100
3	Dec 31	Store Supplies		3100
4	Dec 31	Depreciation Expense	9500
4	Dec 31	Accumulated Depcreciation		9500
5	Dec 31	Sales Salaries Expense	1200
5	Dec 31	Office Salaries Expense	800
5	Dec 31	Salaries Payable		2000
		Closing Entries
	Dec 31	Sales	1150450
	Dec 31	Income Summary		1150450
		(Closing revenue account)
	Dec 31	Income Summary	918488
	Dec 31	Sales Return and Allowance		33600
	Dec 31	Sales Discount		20163
	Dec 31	Cost of Merchandise Sold		596850
	Dec 31	Sales Salaries Expense		120400
	Dec 31	Advertising Expense		29600
	Dec 31	Depreciation Expense		9500
	Dec 31	Store Supplies Expense		3100
	Dec 31	Miscellaneous Selling Expense		4200
	Dec 31	Office Salaries Expense		66300
	Dec 31	Rent Expense		30300
	Dec 31	Insurance Expense		1875
	Dec 31	Miscellaneous Administrative Expense		2600
		(Closing Expense Account)
	Dec 31	Income Summary	231962
	Dec 31	Retained Earning		231962
		(closing Income Summary Account)
	Dec 31	Retained Earning	45000
	Dec 31	Dividends		45000
		(Closign Dividend Account)

Account	Date	Sum of Debit	Sum of Credit	Balance
Cash	Beginning	21200		21200
Cash	Dec 1		2400	18800
Cash	Dec 4		500	18300
Cash	Dec 7	8900		27200
Cash	Dec 10	27200		54400
Cash	Dec 13		21168	33232
Cash	Dec 15		2600	30632
Cash	Dec 16	6860		37492
Cash	Dec 19		11800	25692
Cash	Dec 19		9000	16692
Cash	Dec 21		1100	15592
Cash	Dec 21	17600		33192
Cash	Dec 26		1200	31992
Cash	Dec 28		12400	19592
Cash	Dec 28		800	18792
Cash	Dec 30	23177		41969
Cash	Dec 31		17721	24248
Accounts Payable	Beginning		32200	32200
Accounts Payable	Dec 3		21600	53800
Accounts Payable	Dec 13	21600		32200
Accounts Payable	Dec 19	9000		23200
Accounts Payable	Dec 21		19900	43100
Accounts Payable	Dec 24	2000		41100
Accounts Payable	Dec 31	17900		23200
Accounts Receivable	Beginning	51300		51300
Accounts Receivable	Dec 6	8500		59800
Accounts Receivable	Dec 7		8900	50900
Accounts Receivable	Dec 14		1500	49400
Accounts Receivable	Dec 16		7000	42400
Accounts Receivable	Dec 20	22300		64700
Accounts Receivable	Dec 21	1100		65800
Accounts Receivable	Dec 21		17600	48200
Accounts Receivable	Dec 30	18750		66950
Accounts Receivable	Dec 30		23400	43550
Rent Expense	Beginning	27900		27900
Rent Expense	Dec 1	2400		30300
Rent Expense	Dec 31		30300	0
Merchandise Inventory	Beginning	200800		200800
Merchandise Inventory	Dec 31		12000	188800
Merchandise Inventory	Dec 3	21600		210400
Merchandise Inventory	Dec 4	500		210900
Merchandise Inventory	Dec 6		5000	205900
Merchandise Inventory	Dec 10		16000	189900
Merchandise Inventory	Dec 13		432	189468
Merchandise Inventory	Dec 14	900		190368
Merchandise Inventory	Dec 19	11800		202168
Merchandise Inventory	Dec 20		13200	188968
Merchandise Inventory	Dec 21	19900		208868
Merchandise Inventory	Dec 24		2000	206868
Merchandise Inventory	Dec 26	700		207568
Merchandise Inventory	Dec 30		11250	196318
Merchandise Inventory	Dec 31		179	196139
Sales Salaries Expense	Beginning	111600		111600
Sales Salaries Expense	Dec 31	1200		112800
Sales Salaries Expense	Dec 28	7600		120400
Sales Salaries Expense	Dec 31		120400	0
Office Salaries Expense	Beginning	60700		60700
Office Salaries Expense	Dec 31	800		61500
Office Salaries Expense	Dec 28	4800		66300
Office Salaries Expense	Dec 31		66300	0
Store Supplies	Beginning	3800		3800
Store Supplies	Dec 31		3100	700
Store Supplies	Dec 28	800		1500
Sales	Beginning		1073700	1073700
Sales	Dec 6		8500	1082200
Sales	Dec 10		27200	1109400
Sales	Dec 20		22300	1131700
Sales	Dec 30		18750	1150450
Sales	Dec 31	1150450		0
Cost of Merchandise Sold	Beginning	541000		541000
Cost of Merchandise Sold	Dec 31	12000		553000
Cost of Merchandise Sold	Dec 6	5000		558000
Cost of Merchandise Sold	Dec 10	16000		574000
Cost of Merchandise Sold	Dec 14		900	573100
Cost of Merchandise Sold	Dec 20	13200		586300
Cost of Merchandise Sold	Dec 26		700	585600
Cost of Merchandise Sold	Dec 30	11250		596850
Cost of Merchandise Sold	Dec 31		596850	0
Advertising Expense	Beginning	27000		27000
Advertising Expense	Dec 15	2600		29600
Advertising Expense	Dec 31		29600	0
Sales Discount	Beginning	19800		19800
Sales Discount	Dec 16	140		19940
Sales Discount	Dec 30	223		20163
Sales Discount	Dec 31		20163	0
Sales Return and Allowance	Beginning	30900		30900
Sales Return and Allowance	Dec 14	1500		32400
Sales Return and Allowance	Dec 26	1200		33600
Sales Return and Allowance	Dec 31		33600	0
Insurance Expense	Beginning
Insurance Expense	Dec 31	1875		1875
Insurance Expense	Dec 31		1875	0
Prepaid Insurance	Beginning	5600		5600
Prepaid Insurance	Dec 31		1875	3725
Store Supplies Expense	Beginning
Store Supplies Expense	Dec 31	3100		3100
Store Supplies Expense			3100	0
Depreciation Expense	Beginning
Depreciation Expense	Dec 31	9500		9500
Depreciation Expense	Dec 31		9500	0
Accumulated Depcreciation	Beginning		18900	18900
Accumulated Depcreciation	Dec 31		9500	28400
Salaries Payable	Beginning		0	0
Salaries Payable	Dec 31		2000	2000
Common Stock	Beginning		85100	85100
Common Stock
Retained Earning	Beginning		100000	100000
Retained Earning	Dec 31		231962	331962
Retained Earning	Dec 31	45000		286962
Dividends	Beginning	45000		45000
Dividends	Dec 31		45000	0
Miscellaneous Administrative Expense	Beginning	2600		2600
Miscellaneous Administrative Expense	Dec 31		2600	0
Miscellaneous Selling Expense	Beginning	4200		4200
Miscellaneous Selling Expense	Dec 31		4200	0
Store Equipment	Beginning	156500		156500

	Beginning		Transaction		Unadjusted		Adjusted Entries		Adjusted
Unadjusted Trial Balance	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	21,200	0	3048	0	24,248	0			24248
Accounts Receivable	51,300	0	0	7750	43,550	0			43550
Merchandise Inventory	200,800	0	7339	0	208,139	0		12000	196139
					0	0
Prepaid Insurance	5,600	0	0	0	5,600	0		1875	3725
Store Supplies	3,800	0	800	0	4,600	0		3100	1500
Store Equipment	156,500	0	0	0	156,500	0			156500
Accumulated Depcreciation	0	18,900	0	0	0	18,900		9500		28400
Accounts Payable	0	32,200	9000	0	0	23,200				23200
Salaries Payable	0	0	0	0	0	0		2000		2000
Customers Refunds Payable	0	0	0	0	0	0				0
Common Stock	0	85,100	0	0	0	85,100				85100
Retained Earning	0	100,000	0	0	0	100,000			0	100000
Dividends	45,000	0	0	0	45,000				45000
Income Summary	0	0	0	0	0					0
Sales	0	1,073,700	0	76750	0	1,150,450				1150450
Sales Return and Allowance	30,900	0	2700		33,600				33600
Sales Discount	19,800	0	363		20,163				20163
Cost of Merchandise Sold	541,000	0	43850	0	584,850		12000		596850
Sales Salaries Expense	111,600	0	7600	0	119,200		1200		120400
Advertising Expense	27,000	0	2600	0	29,600				29600
Depreciation Expense	0	0	0	0	0		9500		9500
Store Supplies Expense	0	0	0	0	0		3100		3100
Miscellaneous Selling Expense	4,200	0	0	0	4,200				4200
Office Salaries Expense	60,700	0	4800	0	65,500		800		66300
Rent Expense	27,900	0	2400	0	30,300				30300
Insurance Expense	0	0	0	0	0		1875		1875
Miscellaneous Administrative Expense	2,600	0	0	0	2,600				2600
	1,309,900	1,309,900	84,500	84,500	1,377,650	1,377,650	28,475	28,475	1,389,150	1,389,150

Net Income Statement
Sales		1150450
Less: Sales Return and Allowance		33600
Net Sales		1116850
Less: Sales Discount		20163
		1096687
Less:
Cost of Merchandise Sold		596850
Gross Margin		499837
Less: expenses
Sales Salaries Expense		120400
Advertising Expense		29600
Depreciation Expense		9500
Store Supplies Expense		3100
Miscellaneous Selling Expense		4200
Office Salaries Expense		66300
Rent Expense		30300
Insurance Expense		1875
Miscellaneous Administrative Expense		2600
Net Income		231962
Retained Earning Statement:
Beginning Balance	100000
add: Net Income	231962
Less: Dividends	-45000
Ending Balance	286962
Balance Sheet
Assets:
Current Assets:
Cash	24248
Accounts Receivable	43550
Merchandise Inventory	196139
Prepaid Insurance	3725
Store Supplies	1500
Total Current Assets		269162
Store Equipment	156500
Less:Accumulated Depcreciation	-28400	128100
Total Assets		397262
Current Liabilities:
Accounts Payable		23200
Salaries Payable		2000
Total Liabilities		25200
Common Stock		85100
Retained Earning		286962
Total Liabilities and Equity		397262