Question

The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2018:

Cash	$ 240,000
Accounts receivable	966,000
Inventory	1,690,000
Estimated returns inventory	22,500
Office supplies	13,500
Prepaid insurance	8,000
Office equipment	830,000
Accumulated depreciation-office equipment	550,000
Store equipment	3,600,000
Accumulated depreciation-store equipment	1,820,000
Accounts payable	326,000
Customer refunds payable	40,000
Salaries payable	41,500
Note payable (final payment due 2024)	300,000
Common stock	500,000
Retained earnings	2,949,100
Dividends	100,000
Sales	11,343,000
Cost of goods sold	7,850,000
Sales salaries expense	916,000
Advertising expense	550,000
Depreciation expense-store equipment	140,000
Miscellaneous selling expense	38,000
Office salaries expense	650,000
Rent expense	94,000
Depreciation expense-office equipment	50,000
Insurance expense	48,000
Office supplies expense	28,100
Miscellaneous administrative expense	14,500
Interest expense	21,000

	Required:
1.	Prepare a single-step income statement. Combine selling expenses together in a single entry and combine administrative expenses together in a single entry. If there is a net loss, enter that amount as a negative number using a minus sign.*
2.	Prepare a retained earnings statement. Negative amount should be indicated by the minus sign.*
3.	Prepare balance sheet, assuming that the current portion of the note payable is $50,000. Negative amount should be indicated by the minus sign.*
4.	Prepare closing entries as of May 31, 2018. Refer to the Chart of Accounts for exact wording of account titles.

* Be sure to complete the statement headings. Refer to the problem data and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. CHART OF ACCOUNTS Clairemont Co. General Ledger ASSETS 110 Cash 120 Accounts Receivable 125 Notes Receivable 130 Inventory 131 Estimated Returns Inventory 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 180 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 216 Salaries Payable 217 Note Payable (current portion) 218 Note Payable (final payment due 2024) 219 Sales Tax Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary REVENUE 410 Sales EXPENSES 510 Cost of Goods Sold 521 Delivery Expense 522 Advertising Expense 524 Depreciation Expense-Store Equipment 525 Depreciation Expense-Office Equipment 526 Sales Salaries Expense 527 Office Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 540 Miscellaneous Selling Expense 541 Miscellaneous Administrative Expense 710 Interest Expense Labels and Amount Descriptions Labels Current assets Current liabilities Expenses For the Year Ended May 31, 2018 Long-term liabilities May 31, 2018 Property, plant, and equipment Amount Descriptions Administrative expenses Change in retained earnings Dividends Net income Net income for the year Net loss Net loss for the year Plus dividends Retained earnings, June 1, 2017 Retained earnings, May 31, 2018 Selling expenses Total assets Total expenses Total current assets Total current liabilities Total liabilities Total liabilities and stockholders’ equity Total property, plant, and equipment Total stockholders’ equity Income Statement 1. Prepare a single-step income statement. Combine selling expenses together in a single entry and combine administrative expenses together in a single entry. Be sure to complete the statement headings. Refer to the Chart of Accounts and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. If there is a net loss, enter that amount as a negative number using a minus sign. A colon (:) will automatically appear if it is required. Clairemont Co. Income Statement 1 2 3 4 5 6 7 8 Retained Earnings Statement 2. Prepare a retained earnings statement. Be sure to complete the statement heading. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Negative amount should be indicated by the minus sign. Clairemont Co. Retained Earnings Statement 1 2 3 4 5 Balance Sheet Prepare balance sheet, assuming that the current portion of the note payable is $50,000. Be sure to complete the statement heading. Refer to the problem data and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Negative amount should be indicated by the minus sign. A colon (:) will automatically appear if it is required. Clairemont Co. Balance Sheet 1 Assets 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Liabilities 18 19 20 21 22 23 24 25 26 27 Stockholders’ Equity 28 29 30 31

Answer 1

Answer-

1. Answer -

Clairemont Co.
Income Statement
For the Year Ended May 31, 2018
Sales		$11343000
Expenses:
Cost of goods sold	$7850000
Selling expenses	$1644000
Administrative expenses	$884600
Interest expense	$21000
Total expenses		$10399600
Net income		$943400

Calculation:

a. Selling expenses:

= Sales salaries expense + Advertising expense + Depreciation expense-Store equipment + Miscellaneous selling expense

= $916000 + $550000 + $140000 + $38000

= $1644000

b. Administrative expenses:

= Office salaries expense + Rent expense + Depreciation expense-Office equipment + Insurance expense + Office supplies expense + Miscellaneous administrative expense

= $650000 + $94000 + $50000 + $48000 + $28100 + $14500

= $884600

c. Net income:

= Sales - Total expenses

= $11343000 - $10399600

= $943400

2. Answer -

Clairemont Co.
Retained Earnings Statement
For the Year Ended May 31, 2018
Retained earnings , June 1, 2017		$2949100
Net income for the year	$943400
Less: Dividends	-$100000
Change in retained earnings		$843400
Retained earnings, May 31, 2018		$3792500

Calculation:

a. Change in retained earnings:

= Net income for the year - Dividends

= $943400 - $100000

= $843400

b. Retained earnings, May 31, 2018:

= Retained earnings, June 1, 2017 + Change in retained earnings

= $2949100 + $843400

= $3792500

3. Answer -

Clairemont Co.
Balance Sheet
May 31, 2018
Assets:
Current assets:
Cash		$240000
Accounts receivable		$966000
Inventory		$1690000
Estimated returns inventory		$22500
Office supplies		$13500
Prepaid insurance		$8000
Total current assets			$2940000
Property, plant and equipment:
Office equipment	$830000
Less: Accumulated depreciation-Office equipment	-$550000	$280000
Store equipment	$3600000
Less: Accumulated depreciation-Store equipment	-$1820000	$1780000
Total property, plant and equipment			$2060000
Total assets			$5000000
Liabilities:
Current liabilities:
Accounts payable		$326000
Customer refunds payable		$40000
Salaries payable		$41500
Notes payable (current portion)		$50000
Total current liabilities			$457500
Long-term liabilities:
Notes payable (final payment due 2024)			$250000
Total liabilities			$707500
Stockholders' Equity:
Common stock		$500000
Retained earnings		$3792500
Total stockholders' equity			$4292500
Total liabilities and stockholders' equity			$5000000

Calculation:

Notes payable (final payment due 2024):

= Beginning balance - Notes payable (current portion)

= $300000 - $50000

= $250000

4. Answer -

Date	Accounts	Debit	Credit
May 31, 2018	Sales	$11343000
	Income summary		$11343000
May 31, 2018	Income summary	$10399600
	Cost of goods sold		$7850000
	Advertising expenses		$550000
	Depreciation expense-Store equipment		$140000
	Depreciation expense-Office equipment		$50000
	Sales salaries expense		$916000
	Office salaries expense		$650000
	Rent expense		$94000
	Insurance expense		$48000
	Office supplies expense		$28100
	Miscellaneous selling expense		$38000
	Miscellaneous administrative expense		$14500
	Interest expense		$21000
May 31, 2018	Income summary	$943400
	Retained earnings		$943400
May 31, 2018	Retained earnings	$100000
	Dividends		$100000