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Continuing Problem – Part 2
P5-50 Making adjusting and closing entries, preparing financial statements, and computing
the gross profit percentage
This problem continues the Canyon Canoe Company situation and focuses on nonmerchandising
transactions, adjusting and closing entries, and preparing financial statements. Canyon Canoe
Company does not typically prepare adjusting and closing entries each month, but the company
is surprised at how popular the shirts are and wishes to know the net income for January and
would also like to understand how to prepare the closing entries for a merchandising company.
During January 2019, Canyon Canoe Company completed the following non-merchandising
transactions:
Jan. 2 Collected $4,500 on account.
15 Paid the utilities and telephone bills from December.
15 Paid the wages accrued in December.
18 Rented canoes and received cash, $1,825
20 Received bills for utilities ($360) and telephone ($275) which will be paid later.
23 Paid various accounts payable, $1,800.
30 Paid employee, $750.
Requirements
1. Journalize and post the January transactions. Omit explanations. Use the ledger from the
previous problem for posting.
2. Journalize and post the adjusting entries for the month of January. Omit explanations. Denote
each adjustment as Adj. Compute each account balance, and denote the balance as
Balance. In addition to the adjusting entries from the data from previous chapters, Canyon
Canoe Company provides this data:
a. A physical count of the inventory at the end of the month revealed the cost was $470.
b. The company estimated sales returns will be $30 with a cost of $15.
c. Office supplies used, $55.
d. The Unearned Revenue has now been earned.
e. Interest expense accrued on the notes payable, $50.
3. Prepare the month ended January 31, 2019, single step income statement of Canyon Canoe
Company.
4. Journalize and post the closing entries. Omit explanations. Denote each closing amount as
Clo. and each balance as Balance. After posting all closing entries, prove the equality of
debits and credits in the ledger by preparing a post-closing trial balance.
5. Compute the gross profit percentage for January for Canyon Canoe Company.
SOLUTION
Requirements 1 and 2
P5-50, cont.
Requirements 1 and 2
P5-50, cont.
Requirement 4, cont.
P5-50, cont., Requirements 1, 2, and 4
P5-50, cont., Requirements 1, 2, and 4, cont.
P5-50, cont., Requirements 1, 2, and 4, cont.
P5-50, cont., Requirements 1, 2, and 4, cont.
P5-50, cont.
Requirement 3
P5-50, cont.
Requirement 4
Requirement 5
