Question

Assume it is Monday, May 1, the first business day of the month, and you have just been hired as the accountant for Colo Company which operates with monthly accounting periods. All of the company's accounting work is completed through the end of April, and its ledgers show April 30 balances. During your first month on the job, the company experiences the following transactions and events (terms for all its credit sales are 2/10, n/30 unless stated differentlys: May. 1 Issued Check No. 3410 to S&P Management Co. in payment of the May rent for $3,710. Charge $2,968 to Rent Expense-Selling Space, and charge $742 to Rent Expense-Office Space. (Use two lines to record the transaction.) 2 (a) Sold merchandise on credit to Hensel Company. Invoice No. 8785, for $6,100 (cost is $4,100). 2 (b) Issued an allowance (price reduction) of $175 to Knox Co. for merchandise sold on April 28. The total selling price (gross) was $4,725. Issued a refund of $798 to Peyton Products for the return of merchandise purchased on April 29. Colo's accounts payable was reduced by that amount. Purchased the following on credit from Gear Supply Co.: merchandise, $37,072; store supplies, $574; and office supplies, $83. Invoice dated May 4, terms n/10 EOM. Received payment from Knox Co. for the balance from the April 28 (54,550) sale less the May 2 return and the $91 discount. Issued Check No. 3411 to Peyton Products to pay for the $7,098 of merchandise purchased on April 29 less the May 3 return and the $126 discount. Sold store supplies (noninventory) to the merchant next door at their cost of $350 cash. 10 Purchased $4,074 of office equipment on credit from Gear Supply Co., terms n/10 EOM. 11 (a) Received payment from Hensel Company for the May 2 sale less the discount of $122. 11 (b) Purchased $8,800 of merchandise fron Garcia, Inc., terms 2/10, n/30. Received a $854 price reduction fron Gear Supply Co. for the return of office equipment received on May 10. Colo debited accounts payable by that amount. 15 (a) Issued Check No. 3412, payable to Payroll, in payment of sales salaries, $5,320, and office salaries, $3,150. 15 (b) Cash sales for the first half of the month are $59, 220 (cost is $38,200). These cash sales are recorded in the cash receipts journal on May 15. 15 (c) Post to the customer and creditor accounts. Also post individual items that are not included in column totals at the end of the month to the general ledger accounts. Sold merchandise on credit to Hensel Company, Invoice No. 8786, for $3,990 (cost is $1,890). Purchased $13,650 of merchandise from Fink Corp., terms 2/10, n/60. Issued Check No. 3413 to Garcia, Inc., in payment of its May 11 purchase less the discount of $176. 22 Sold merchandise to Lee Services, Invoice No. 8787, for $6,850 (cost is $4.990), terns 2/10, n/60. Issued Check No. 3414 to Fink Corp. in payment of its May 17 purchase less the discount of $273. 12 16 19

Answer 1

COLO COMPANY Cash Receipts Journal Sales Discount Debit 91 Accts. Recv. Credit 4,550 Sales Credit Other Accts. Credit COGS Debit Inv. Credit Trans. No. 81 82 Date Account Cr. May 5 Knox, Inc. 9 Store Supplies 11 Hensel Company 15 Sales 350 122 6,100 Explanation Sale of April Sold store sul Sale of May Cash sales, May 1-15 Sale of May 2 Cash Sales, May 16-31 Cash Debit 4,459 350 5,978 59,220 70,007 6,713 66,052 72,765 142,772 59,220 59,220 350 38,200 38,200 213 137 10,650 6,850 30 Lee Services 31 Sales 85 86 1376850 350 17,500 66,052 66052 125,272 42,500 42500 80,700 31 Totals 350

COLO COMPANY Cash Disbursements Journal Purch. Disc. Credit Accts. Pay. Check No. 3410 Date May 1 Other Accts. Debit 2,968 742 Debit 8 126 6,300 3411 3412 5,320 3,150 Account Trans. Payee Debited No. S&P Mgmt. Cd Rent Exp., S 76 Rent Exp., Office Peyton Produ Peyton Prod 77 Payroll Sales Salari 78 Office Salaries Exp. Garcia, Inc. Garcia, Inc. Fink Corp. Fink Corp. 80 Perennial Pov Utilities Exp. 81 Jenny Colo J. Colo, With 82 Payroll Sales Salari 83 Office Salaries Exp. Totals Cash Credit 2,968 742 6,174 5,320 3,150 8,624 13,377 1,283 7,000 5,320 3,150 57,108 176 273 8,800 13,650 3413 3414 3415 3416 3417 1,283 7,000 5,320 3,150 28,933 575 | 28,750

COLO COMPANY General Journal Trans. No. 65 Credit Debit 175 175 Date Description May 2 Sales Returns and Allowances Accounts Receivable-Knox, Inc. 3 Accounts Payable-Peyton Products Inventory 12 Accounts Payable-Gear Supply Co. Office Equipment 798 798 67 854 68 553 553 669 669 Adjusting entries May 31 Insurance Expense Prepaid Insurance 31 Store Supplies Expense Store Supplies 31 Office Supplies Expense | Office Supplies 31 Depreciation Expense, Store Equip. Accumulated Depr., Store Equip. 31 Depreciation Expense, Office Equip. Accumulated Depr., Office Equip 701 289 289 71 567 567 72 3 29 329 Closing entries May 31 Income Summary Sales Discounts 73 124,775 350

73 124,775 350 99,910 329 567 | 6,300 10,640 553 Closing entries May 31 Income Summary Sales Discounts Sales Returns and Allowances Cost of Goods Sold Depr. Expense, Office Equipment Depr. Expense, Store Equipment Office Salaries Expense Sales Salaries Expense Insurance Expense Rent Expense, Office Space Rent Expense, Selling Space Office Supplies Expense Store Supplies Expense Utilities Expense 31 Sales Income Summary 31 Income Summary J. Colo, Capital 31 J. Colo, Capital J. Colo, Withdrawals 742 2,968 289 669 1,283 741 156,422 156,422 75 31,647 31,647 76 7 000 7,000

COLO COMPANY For Month Ended May 31, 2015 Unadjusted Income Balance Sheetor Statement Trial Balance Adjustments Statement of Owner's Equity Acoound Debit Credit Debit Credit Debit Credit Debit Credit Cash 135,911 135,911 Accounts receivable 18,200 18,200 Merchandise inventory 189,519 189,519 Office supplies 504 289 504 Store supplies 2,632 669 2,632 | Prepaid insurance 2,765 553 2,765 Office equipment . 25,690 25,690 Acoum. depr., office equip. 9 898 567 10,227 Store equipment 38,920 38,920 Accum. depr., store equip. 17,556 329 18,123 Accounts payable 53,059 53,059 J. Colo, Capital 308,085 339,732 J. Colo, Withdrawals 7,000 7,000 Sales 156,422 156 422 Sales discounts T 350 350 Sales returns and allowances 175 175 Cost of goods sold 1 99.910 9 9 9101 Depr. expense, office equip. 567 567 Depr. expense, store equip. 329 329 Office salaries expense 6.300 6,300 Sales salaries expense 10,640 10.640 1 Insurance expense 553 553 1553 Rent exp. office space 742 1742 Rent exp., selling space 2.968 2.968 Office supplies expense 289 289 289 Store supplies expense 669 669 669 Utilities expense 1,283 1283 Totals 545,020 545,020 2,407 2,407 124,775 156,422 Net income 31,647 | Totals 156,422 156,422 421,141 421,141 742


COLO COMPANY Income Statement For Month Ended May 31, 2005 $ 156,4221 350 175 525 $ 155,897 99.910 $ 55,987 Revenue: Sales Less: Sales discounts 1$ Sales returns and allowances Net sales Less: Cost of goods sold Gross profit on sales Operating expenses Selling expenses: Depreciation expense, store equipme $ Sales salaries expense Rent expense, selling space Store supplies expense Total selling expenses General and administrative expenses: Depreciation expense, office equipme $ Office salaries expense Insurance expense Rent expense, office space Office supplies expense Utilities expense Total general and administrative expe Total operating expenses Net income 329 10,640 2,968 669 14,606 $ 14,606 567 6,300 5531 742 289 1.283 9.734 9,7341 24,340 $ 31,647 |

COLO COMPANY
Statement of Owner's Equity
Jenny Colo, Capital, April 30,	$308,085
Plus: Net income	31,647
Total	$339,732
Less: Withdrawals by owner	7,000
Jenny Colo, Capital, May 31	$332,732

COLO COMPANY
Post-Closing Trial Balance
	Debit	Credit
Cash	$135,911
Accounts receivable	18,200
Merchandise inventory	189,519
Office supplies	504
Store supplies	2,632
Prepaid insurance	2,765
Office equipment	25,690
Accum. depr., office equipment		$10,227
Store equipment	38,920
Accum. depr., store equipment		18,123
Accounts payable		53,059
Jenny Colo, Capital		332,732
Totals	$414,141	$414,141

COLO COMPANY
Schedule of Accounts Receivable
Crane Corp.	$14,210
Hensel Company	3,990
Total accounts receivable	$18,200
COLO COMPANY
Schedule of Accounts Payable
Peyton Products	$3,080
Gear Supply Co.	49,979
Total accounts payable	$53,059