CHAPTER 5 Accounting for Retail Businesses
Comp. Prob. 2 (Continued)
Account:
Common Stock
Account No.
310
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y6
May
1
Balance
✓
100,000
Account:
Retained Earnings
Account No.
311
Ref.
Credit
Debit
20Y5
1
Balance
20Y6
May
Closing
741,855
Closing
Account:
Dividends
Account No.
312
Date
Item
Ref.
Debit
Credit
Debit
20Y6
May
1
Balance
Closing
135,000
Account:
Sales
Account No.
410
Ref.
Debit
Credit
Debit
Credit
20Y6
May
1
Balance
6
Adjusting
60,000
Closing
CHAPTER 5 Accounting for Retail Businesses
5–62
Comp. Prob. 2 (Continued)
Account:
Cost of Goods Sold
Account No.
510
Date
Item
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
20Y6
May
1
Balance
✓
2,823,000
6
20
41,000
10
20
32,000
20
21
70,000
30
21
47,000
3,013,000
31
Adjusting
22
13,950
31
Adjusting
22
35,000
2,991,950
31
Closing
23
2,991,950
—
—
Account:
Sales Salaries Expense
Account No.
520
Date
Item
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
20Y6
May
1
Balance
✓
664,800
28
21
56,000
720,800
31
Adjusting
22
7,000
727,800
31
Closing
23
727,800
—
—
Account:
Advertising Expense
Account No.
521
Date
Item
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
20Y6
May
1
Balance
✓
281,000
15
20
11,000
292,000
31
Closing
23
292,000
—
—
Account:
Depreciation Expense
Account No.
522
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y6
May
31
Adjusting
22
14,000
14,000
31
Closing
23
14,000
—
—
CHAPTER 5 Accounting for Retail Businesses
Comp. Prob. 2 (Continued)
Account:
Stores Supplies Expense
Account No.
523
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y6
May
31
Adjusting
22
9,800
9,800
31
Closing
23
9,800
—
—
Account:
Miscellaneous Selling Expense
Account No.
529
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y6
May
Balance
12,600
31
Closing
12,600
—
—
Account:
Office Salaries Expense
Account No.
530
Date
Item
Ref.
Credit
20Y6
May
Balance
382,100
28
411,100
31
Adjusting
417,700
31
Closing
—
Account:
Rent Expense
Account No.
531
Date
Item
Ref.
Credit
20Y6
May
Balance
Account:
Insurance Expense
Account No.
532
Post.
Date
Item
Ref.
Debit
Credit
20Y6
May
31
Adjusting
22
CHAPTER 5 Accounting for Retail Businesses
5–64
Comp. Prob. 2 (Continued)
Account:
Miscellaneous Administrative Expense
Account No.
539
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y6
May
1
Balance
✓
7,800
31
Closing
23
7,800
—
—
CHAPTER 5 Accounting for Retail Businesses
5–65
Comp. Prob. 2 (Continued)
1. and 2.
JOURNAL
Page
20
Date
Post.
Ref.
Debit
Credit
20Y6
May
1
Rent Expense
531
5,000
Cash
110
5,000
3
Inventory
115
35,280
Accounts Payable—Martin Co.
210
35,280
[$36,000 – ($36,000 2%)].
4
Inventory
115
600
Cash
110
600
6
Accounts Receivable—Korman Co.
112
67,130
Sales
410
67,130
[$68,500 – ($68,500 2%)].
6
Cost of Goods Sold
510
41,000
Inventory
115
41,000
7
Cash
110
22,300
Accounts Receivable—Halstad Co.
112
22,300
10
Cash
110
54,000
Sales
410
54,000
10
Cost of Goods Sold
510
32,000
Inventory
115
32,000
13
Accounts Payable—Martin Co.
210
35,280
Cash
110
35,280
15
Advertising Expense
521
11,000
Cash
110
11,000
16
Cash
110
67,130
Accounts Receivable—Korman Co.
112
67,130
19
Inventory
115
18,700
Cash
110
18,700
19
Accounts Payable—Buttons Co.
210
33,450
Cash
110
33,450
20
Customers Refunds Payable
212
13,230
Cash
110
13,230
[$13,500 – ($13,500 2%)].
20
Inventory
115
8,000
Estimated Returns Inventory
116
8,000
CHAPTER 5 Accounting for Retail Businesses
5–66
Comp. Prob. 2 (Continued)
Page
21
Post.
Ref.
Debit
Credit
20Y6
May
20
Accounts Receivable—Crescent Co.
112
108,900
Sales
410
108,900
[$110,000 – ($110,000 1%)].
20
Cost of Goods Sold
510
70,000
Inventory
115
70,000
21
Accounts Receivable—Crescent Co.
112
2,300
Cash
110
2,300
21
Cash
110
42,900
Accounts Receivable—Gee Co.
112
42,900
21
Inventory
115
87,120
Accounts Payable—Osterman Co.
210
87,120
[$88,000 – ($88,000 1%)].
24
Accounts Payable—Osterman Co.
210
4,950
Inventory
115
4,950
26
Customers Refunds Payable
212
7,500
Cash
110
7,500
26
Inventory
115
4,800
Estimated Returns Inventory
116
4,800
28
Sales Salaries Expense
520
56,000
Office Salaries Expense
530
29,000
Cash
110
85,000
29
Store Supplies
118
2,400
Cash
110
2,400
30
Accounts Receivable—Turner Co.
112
77,175
Sales
410
77,175
[$78,750 – ($78,750 2%)].
30
Cost of Goods Sold
510
47,000
Inventory
115
47,000
30
Cash
110
111,200
Accounts Receivable—Crescent Co.
112
111,200
31
Accounts Payable—Osterman Co.
210
82,170
Cash
110
82,170
($87,120 – $4,950).
CHAPTER 5 Accounting for Retail Businesses
5–67
Comp. Prob. 2 (Continued)
3.
Palisade Creek Co.
Unadjusted Trial Balance
May 31, 20Y6
Account
Debit
Credit
No.
Balances
Balances
Cash
110
84,500
Accounts Receivable
112
245,875
Inventory
115
583,950
Estimated Returns Inventory
116
15,200
Prepaid Insurance
117
16,800
Store Supplies
118
13,800
Store Equipment
123
569,500
Accumulated Depreciation—Store Equipment
124
56,700
Accounts Payable
210
63,150
Salaries Payable
211
—
Customers Refunds Payable
212
29,270
Common Stock
310
100,000
Retained Earnings
311
585,300
Dividends
312
135,000
Sales
410
5,376,205
Cost of Goods Sold
510
3,013,000
Sales Salaries Expense
520
720,800
Advertising Expense
521
292,000
Depreciation Expense
522
—
Store Supplies Expense
523
—
Miscellaneous Selling Expense
529
12,600
Office Salaries Expense
530
411,100
Rent Expense
531
88,700
Insurance Expense
532
—
Miscellaneous Administrative Expense
539
7,800
6,210,625
6,210,625
CHAPTER 5 Accounting for Retail Businesses
5–68
Comp. Prob. 2 (Continued)
4. and 6.
JOURNAL
Page
22
Date
Post.
Ref.
Debit
Credit
20Y6
Adjusting Entries
May
31
Cost of Goods Sold
510
13,950
Inventory
115
13,950
Inventory shrinkage
($583,950 – $570,000).
31
Insurance Expense
532
12,000
Prepaid Insurance
117
12,000
Insurance expired.
31
Store Supplies Expense
523
9,800
Store Supplies
118
9,800
Supplies used ($13,800 – $4,000)
31
Depreciation Expense
522
14,000
Accum. Depr.—Store Equipment
124
14,000
Store equipment depreciation.
31
Sales Salaries Expense
520
7,000
Office Salaries Expense
530
6,600
Salaries Payable
211
13,600
Accrued salaries.
31
Sales
410
60,000
Customer Refunds Payable
212
60,000
31
Estimated Returns Inventory
116
35,000
Cost of Goods Sold
510
35,000
CHAPTER 5 Accounting for Retail Businesses
5–69
Comp. Prob. 2 (Continued)
7.
Palisade Creek Co.
Adjusted Trial Balance
May 31, 20Y6
Account
Debit
Credit
No.
Balances
Balances
Cash
110
84,500
Accounts Receivable
112
245,875
Inventory
115
570,000
Estimated Returns Inventory
116
50,200
Prepaid Insurance
117
4,800
Store Supplies
118
4,000
Store Equipment
123
569,500
Accum. Depreciation—Store Equipment
124
70,700
Accounts Payable
210
63,150
Salaries Payable
211
13,600
Customers Refunds Payable
212
89,270
Common Stock
310
100,000
Retained Earnings
311
585,300
Dividends
312
135,000
Sales
410
5,316,205
Cost of Goods Sold
510
2,991,950
Sales Salaries Expense
520
727,800
Advertising Expense
521
292,000
Depreciation Expense
522
14,000
Store Supplies Expense
523
9,800
Miscellaneous Selling Expense
529
12,600
Office Salaries Expense
530
417,700
Rent Expense
531
88,700
Insurance Expense
532
12,000
Miscellaneous Administrative Expense
539
7,800
6,238,225
6,238,225
CHAPTER 5 Accounting for Retail Businesses
5–70
Comp. Prob. 2 (Continued)
8.
Palisade Creek Co.
Income Statement
For the Year Ended May 31, 20Y6
Sales
$ 5,316,205
Cost of goods sold
(2,991,950)
Gross profit
$ 2,324,255
Expenses:
Selling expenses:
Sales salaries expense
$727,800
Advertising expense
292,000
Depreciation expense
14,000
Store supplies expense
9,800
Miscellaneous selling expense
12,600
Total selling expenses
$1,056,200
Administrative expenses:
Office salaries expense
$417,700
Rent expense
88,700
Insurance expense
12,000
Miscellaneous administrative
expense
7,800
Total administrative expenses
526,200
Total expenses
(1,582,400)
Net income
$ 741,855
Palisade Creek Co.
Statement of Stockholders’ Equity
For the Year Ended May 31, 20Y6
Common
Stock
Retained
Earnings
Total
Balances, June 1, 20Y5
$ 90,000
$ 585,300
$ 675,300
Issued common stock
10,000
10,000
Net income
741,855
741,855
Dividends
(135,000)
(135,000)
Balances, May 31, 20Y6
$100,000
$1,192,155
$ 1,292,155
CHAPTER 5 Accounting for Retail Businesses
Comp. Prob. 2 (Continued)
Palisade Creek Co.
Balance Sheet
May 31, 20Y6
Assets
Current assets:
Cash
$ 84,500
Accounts receivable
245,875
Inventory
570,000
Estimated returns inventory
50,200
Prepaid insurance
4,800
Store supplies
4,000
Total current assets
$ 959,375
Property, plant, and equipment:
Store equipment
$ 569,500
Accum. depreciation—store equipment
(70,700)
Total property, plant, and equipment
498,800
Total assets
$1,458,175
Liabilities
Current liabilities:
Accounts payable
$ 63,150
Salaries payable
13,600
Customers refunds payable
89,270
Total liabilities
$ 166,020
Stockholders’ Equity
Common stock
$ 100,000
Retained earnings
1,192,155
Total stockholders’ equity
1,292,155
Total liabilities and stockholders’ equity
$1,458,175