Question

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

1. Paid rent for May, $5,000.

3. Purchased merchandise on account from Martin Co., terms 2/10, n/30, FOB shipping

point, $36,000.

4. Paid freight on purchase of May 3, $600.

6. Sold merchandise on account to Korman Co., terms 2/10, n/30, FOB shipping point,

$68,500. The cost of the goods sold was $41,000.

7. Received $22,300 cash from Halstad Co. on account.

10. Sold merchandise for cash, $54,000. The cost of the goods sold was $32,000.

13. Paid for merchandise purchased on May 3.

15. Paid advertising expense for last half of May, $11,000.

16. Received cash from sale of May 6.

19. Purchased merchandise for cash, $18,700.

19. Paid $33,450 to Buttons Co. on account.

20. Paid Korman Co. a cash refund of $13,230 for returned merchandise from sale of

May 6. The invoice amount of the returned merchandise was $13,500 and the

cost of the returned merchandise was $8,000.

20. Sold merchandise on account to Crescent Co., terms 1/10, n/30, FOB shipping

point, $110,000. The cost of the goods sold was $70,000.

21. For the convenience of Crescent Co., paid freight on sale of May 20, $2,300.

21. Received $42,900 cash from Gee Co. on account.

21. Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB

destination, $88,000.

24. Returned damaged merchandise purchased on May 21, receiving a credit memo

from the seller for $5,000.

26. Refunded cash on sales made for cash, $7,500. The cost of the merchandise returned

was $4,800.

28. Paid sales salaries of $56,000 and office salaries of $29,000.

29. Purchased store supplies for cash, $2,400.

30. Sold merchandise on account to Turner Co., terms 2/10, n/30, FOB shipping point,

$78,750. The cost of the goods sold was $47,000.

30. Received cash from sale of May 20 plus freight paid on May 21.

31. Paid for purchase of May 21, less return of May 24.

Complete the following:

1. Prepare journal entries for all May transactions

2. Post journal entries to appropriate ledgers (t-charts) – remember there are starting balances above!

3. Prepare an unadjusted trial balance.

4. Prepare (and post) the adjusting journal entries given the following information:

a. Inventory on May 31 = $570,000

b. Insurance expired during the year = $12,000

c. Store supplies on hand on May 31 = $4,000

d. Depreciation for the current year = $14,000

e. Accrued salaries on May 31:

Sales salaries $7,000

Office salaries 6,600

13,600

f. The adjustment for customer returns and allowances is $60,000 for sales and $35,000 for cost of goods sold.

5. Prepare an adjusted trial balance.

6. Prepare an Income Statement, Statement of Stockholder’s Equity, and Balance

Sheet.

7. Prepare and post the closing journal entries.

8. Prepare a post-closing trial balance.

Answer 1

Answer to Question No. 1

Journal for all transactions for May

2

			Fig In $
Date	Particulars	Dr. Amt	Cr Amt
1st May	Rent	5000
	To Cash		5000
3rd May	Purchases-Merchandise	36000
	To Martin Co.		36000
4th May	Freight Inward	600
	To Cash		600
6th May	Korman Co	68500
	To Sales		68500
6th May	Cost of Goods sold	41000
	To Inventory		41000
7th May	Cash	22300
	To Halstad Co		22300
10thMay	Cash	54000
	To Sales		54000
10thMay	Cost of Goods Sold	32000
	to Inventory		32000
13th May	Martin Co.	36000
	To Cash		36000
16th May	Cash	68500
	To Korman Co		68500
19th May	Purchases-Merchandise	18700
	To Cash		18700
	Purchased for cash
19th May	Buttons Co.	33450
	To Cash		33450
	Paid on account
20th May	Korman Co	13500
	To cash		13230
	To Gain on return		270
20th May	Sales Return	13500
	To Korman Co		13500
20th May	Inventory	8000
	To Cost of Goods sold		8000
	Stock taken and cost reversed
20th May	Crescent Co.,	110000
	To sales		110000
20th May	Cost of Goods Sold	70000
	to Inventory		70000
21st May	Crescent Co.,	2300
	To Cash		2300
	Freight on behalf paid
21st May	Cash	42900
	ToGee Co		42900
21st May	Purchases-Merchandise	88000
	To Osterman Co		88000
24thMay	Osterman Co	5000
	To Purchase return		5000
	Goods returned
26th May	Sales return	7500
	To cash		7500
26th May	Inventory	4800
	To cost of goods sold		4800
28th May	Salaries-Sales team	56000
	Salaries-office team	29000
	To Cash		85000
	Salaries paid
29th May	Stores	2400
	To cash		2400
	Purchased store supplies for cash, $2,400.
30th May	Turner Co	78750
	To sales		78750
30th May	Cost of Goods Sold	47000
	to Inventory		47000
	Cost of merchandise sold charged off
30th May	Cash	112300
	To Crescent Co.,		112300
31st May	Osterman Co	83000
	To cash		83000

2) Ledgers for Personal accounts

					Fig in $
Martin Co
Date	Particulars	Dr Amt	Date	Particulars	Cr Amt
13th May	To cash	36000	3rd May	Purchases-Merchandise	36000
		36000			36000
					Fig in $
Korman Co
Date	Particulars	Dr Amt	Date	Particulars	Cr Amt
6th May	To sales	68500	16th May	Purchases-Merchandise	68500
		68500			68500
					Fig in $
Halstad Co
Date	Particulars	Dr Amt	Date	Particulars	Cr Amt
31st May	Balanace C/f	22300	7th May	Cash	22300
		22300			22300
				Balance b/F	22300
					Fig in $
Buttons Co
Date	Particulars	Dr Amt	Date	Particulars	Cr Amt
19th May	To cash	33450	31st May	Balanace C/f	33450
		33450			33450
	Balance b/F	33450
					Fig in $
Crescent Co.,
Date	Particulars	Dr Amt	Date	Particulars	Cr Amt
20thMay	To Sales	110000	30th May	Cash	112300
	To Cash	2300
		112300			112300
					Fig in $
Osterman Co
Date	Particulars	Dr Amt	Date	Particulars	Cr Amt
20thMay	To Purchase return	5000	21s May	Purchases-Merchandise	88000
31st May	To Cash	83000
		88000			88000

					Fig in $
Turner Co
Date	Particulars	Dr Amt	Date	Particulars	Cr Amt
30th May	To Sales	78750	31st May	Balance C/F	78750
		78750			78750
	Balance b/f	78750

					Fig in $
Gee Co
Date	Particulars	Dr Amt	Date	Particulars	Cr Amt
31stMay	Balanace C/f	42900	21st May	Cash	42900
		42900			42900
				Balance b/F	42900