Question

In: Accounting

eginning balances of FRS Company’s accounts as of January 1, 2018 as given below: Beg Balance...

eginning balances of FRS Company’s accounts as of January 1, 2018 as given below:

Beg Balance

Account Title

Debit

Credit

Cash

365,800

Accounts Receivable

42,500

Supplies

13,000

Prepaid Insurance

0

Inventory

18,000

Equipment

46,000

Accumulated Depreciation-Equipment

20,000

Accounts Payable

82,500

Salary Payable

16,000

Unearned Sales Revenue

25,000

Capital

341,800

Withdrawals

0

Sales Revenue

Sales Returns& Allowances

Sales Discounts

Cost of Goods Sold

Insurance Expense

Depreciation Expense-Equipment

Supplies Expense

Salary Expense

Total

485,300

485,300

During January 2018, FRS Company completed the following transactions:

  • Jan 1: Paid 6 months insurance in advance for $10,800.
  • Jan 2: Purchased 400 units of inventory for 32,000$ from Great Company, on terms, 3/10, n/eom.And paid $2,000 of commissions and freight charges for the purchase from Great Company.
  • Jan 4: Purchased 150 units of inventory from Deluxe Company on account with terms 2/5, n/30. Total invoice is $13,500.
  • Jan 5: Paid accrued salary of the December 2016, $16,000.
  • Jan 13: Paid to Great Company.
  • Jan 15: Sold 600 units of goods to Shine Company for $90,000 ($150 each) on account with terms 2/10, n/30.
  • Jan 17: Received 50 units of goods back from Shine Company (Returned goods are from $85 of cost each).
  • Jan 20: Received payment from Shine Company, settling the amount due in full.
  • Jan 23: Sold 40 units on account, $6,000 ($150 each) to Bridget Company.
  • Jan 27: Purchased supplies for cash of $13,000.

On January 31, 2018 FRS Company completed following adjusting entries:

  • Expiration of prepaid insurance for one month
  • Depreciation of equipment for the month, $8,500
  • Supplies used, $12,000
  • Unearned sales revenue still unearned, $12,000.
  • Accrued salary of the January 2017 is $16,000 which will be paid on the 5th of February.

Requirements:

  1. Journalize and post the January transactions. (Open T-accounts for each of the accounts given in trial balance, do not forget to write beginning balances) (2 points each)
  2. Prepare FIFO schedule to calculate the Cost of Goods Sold (COGS) on the Jan 15th, and 23th. (Beginning inventory as of January 1 include 225 units $80 each which totals $18,000 as given) (19 points)
  3. Prepare unadjusted trial balance as of January 31, 2018. (10 points)
  4. Journalize and post the adjusting entries. (3 points each)
  5. Prepare adjusted trial balance as of January 31, 2018. (10 points)

Solutions

Expert Solution

Pre-apid insurance 10800
To cash 10800
(being insurance premium paid)
Purchases 32000
To accounts payable 32000
(being purchase of 400 units from great company)
Commission and freight 2000
To cash 2000
Purchases 13500
To accounts payable 13500
Accrued salaries 16000
To cash 16000
(being accrued salary paid)
Accounts payable 32000
To cash 32000
(being cash paid to great company post discount period)
Accounts Receivable 90000
To Sales 90000
(being sold 600 units to shine company)
Cost of goods sold 48000
To purchases 48000
(being purchases assigned to goods sold)
Sales return 7500
Accounts receivable 7500
(Being sales return accounted)
Inventory 4250
To cost of goods sold 4250
(COGS reversed on return)
Cash 88200
Discount 1800
To accounts receivable 90000
(being cash received from receivables)
Accounts receivable 6000
To Sales 6000
(being sales made)
Cost of goods sold 3350
To Purchases 3350
(being debited from inventory)
Supplies 13000
To cash 13000
(being supplies purchased)
Insurance 1800
To prepaid insurance 1800
(insurance expensed)
Depreciation 8500
To accumulated depreciationon equipment) 8500
(depreciation accounted for)
Supplies expense 12000
To Supplies 12000
(being supplies used)
Unearned revenue 13000
To Sales 13000
(revenue earned during the period)
Salaries and Wage 16000
To accrued salaries payable 16000
(Salaries payable)
Cash
Particulars Amount Particulars Amount
Opening 365800 By Prepaid Insurance 10800
To accounts receivable 88200 By Commission and freight 2000
By accrued salary 16000
By Accounts payable 32000
By Supplies 13000
By Balance 380200
454000 454000
Accounts Receivable
Particulars Amount Particulars Amount
Opening 42500 By Sales return 7500
To sales 90000 By discount 1800
To Sales 6000 By Cash 88200
By Balance 41000
138500 138500
Supplies
Particulars Amount Particulars Amount
Opening 13000 By Supplies expense 12000
To cash 13000 By Balance 14000
26000 26000
Prepaid insurance
Particulars Amount Particulars Amount
Opening 0 By Insurance expense 1800
To cash 10800 By Balance 9000
10800 10800
Inventory
Particulars Amount Particulars Amount
Opening 18000 By cost of goods sold 47100
To purchase 32000 By inventory 16400
To purchase 13500
Equipment
Particulars Amount Particulars Amount
Opening 46000 By balance 46000
Accumulated depreciation
Particulars Amount Particulars Amount
Opening 20000
By balance 28500 To depreciation 8500
28500 28500
Accounts payable
Particulars Amount Particulars Amount
To cash 32000 Opening 82500
By balance 96000 By purchase 32000
By purchase 13500
128000 128000
Salary payable
Particulars Amount Particulars Amount
To cash 16000 Opening 16000
To balance 16000 To salaries expense 16000
32000 32000
Unearned sales revenue
Particulars Amount Particulars Amount
To sales 13000 Opening 25000
To balance 12000
25000 25000
Capital
Particulars Amount Particulars Amount
Opening 341800
Balance 351850 Profit 10050
351850 351850
Sales
Particulars Amount Particulars Amount
By accounts receivable 90000
By P&L 109000 By accounts receivable 6000
By unearned reveneue 13000
109000 109000
Sales returns
Particulars Amount Particulars Amount
opening 0
To accounts receivable 7500 By P&L 7500
7500 7500
Sales discounts
Particulars Amount Particulars Amount
opening 0
To accounts receivable 1800 By P&L 1800
1800 1800
Cost of goods sold
Particulars Amount Particulars Amount
opening 0 Return 4250
To purchases 48000
To purchases 3350 By P&L 47100
51350 51350
Insurance expense
Particulars Amount Particulars Amount
Opening 0
Prepaid insurance 1800 By P&L 1800
1800 1800
Depreciation expense
Particulars Amount Particulars Amount
Opening 0
Accumulated depreciation on equipment 8500 By P&L 8500
8500 8500
Supplies expense
Particulars Amount Particulars Amount
Opening 0
Accumulated depreciation on equipment 12000 By P&L 12000
12000 12000
Salary expense
Particulars Amount Particulars Amount
Opening 0
Accrued salary 16000 By P&L 16000
16000 16000
Inventory
Purchase Sales Balance
Paticulars Qty Price Qty Price Qty Price
Opening 225 80 18000 225 80 18000
Purchases 400 80 32000 625 80 50000
Purchases 150 90 13500 625 80 50000
150 90 13500
Sales 600 80 48000 25 80 2000
150 90 13500
Sales return 50 85 4250 25 80 2000
150 90 13500
50 85 4250
Sales 40 83.75 3350 135 90 12150
50 85 4250
185 16400
Assuming sales return was considered as purchase on date of return the goods and hence acc to FIFO they were added later than the goods costing 90 rs and 80 rs each)
Trail Balance Unadjusted Adjusted
Cash 3,80,200 380200
Accounts Receivable 41,000 41000
Supplies 26,000 14000
Prepaid Insurance 10800 9000
Inventory 16,400 16400
Equipment 46,000 46000
Accumulated Depreciation-Equipment 20,000 28500
Accounts Payable 96,000 96000
Salary Payable 16,000 16000
Unearned Sales Revenue 25,000 12000
Capital 3,41,800 3,41,800
Withdrawals 0 0
Sales Revenue 96000 109000
Sales Returns& Allowances 7500 7500 7500
Sales Discounts 1800 1800 1800
Cost of Goods Sold 47100 47100 40500
Insurance Expense 0 1800
Depreciation Expense-Equipment 0 8500
Supplies Expense 0 12000
Salary 16000 16000 16000
Commission and freight 2000 0 2000
5,94,800 5,94,800 6,03,300 6,03,300

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