Concept explainers
• LO2–5
Excalibur Corporation sells video games for personal computers. The unadjusted
Account Title | Debits | Credits |
Cash | 23,300 | |
Accounts receivable | 32,500 | |
Supplies | –0– | |
Prepaid rent | –0– | |
Inventory | 65,000 | |
Office equipment | 75,000 | |
10,000 | ||
Accounts payable | 26,100 | |
Salaries and wages payable | 3,000 | |
Note payable | 30,000 | |
Common stock | 80,000 | |
Retained earnings | 16,050 | |
Sales revenue | 180,000 | |
Cost of goods sold | 95,000 | |
Interest expense | –0– | |
Salaries and wages expense | 32,350 | |
Rent expense | 14,000 | |
Supplies expense | 2,000 | |
Utility expense | 6,000 | |
Totals | 345,150 | 345,150 |
Information necessary to prepare the year-end adjusting entries appears below.
1. The office equipment was purchased in 2016 and is being
2. Accrued salaries and wages at year-end should be $4,500.
3. The company borrowed $30,000 on September 1, 2018. The principal is due to be repaid in 10 years. Interest is payable twice a year on each August 31 and February 28 at an annual rate of 10%.
4. The company debits supplies expense when supplies are purchased. Supplies on hand at year-end cost $500.
5. Prepaid rent at year-end should be $1,000.
Required:
Prepare the necessary December 31, 2018, adjusting entries.
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Chapter 2 Solutions
Intermediate Accounting
- Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2016 (unless otherwise indicated), are as follows: During May, the last month of the fiscal year, the following transactions were completed: May 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 merchandise 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 merchandise 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. Record the following transactions on Page 21 of the journal: 20. Sold merchandise on account to Crescent Co., terms 1/10, n/30, FOB shipping point, 110,000. The cost of the merchandise 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. May 21. Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB destination, 88,000. 24. Returned of 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 merchandise 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. Instructions 1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark () in the Posting Reference column. Journalize the transactions for July, starting on Page 20 of the journal. 2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6). f. The adjustment for customer returns and allowances is 60,000 for sales and 35,000 for cost of merchandise sold. 5. (Optional) Enter the unadjusted trial balance on a IO-column end-of-period spreadsheet (work sheet), and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 22 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a statement of owners equity, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 23 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the owners capital account. 10. Prepare a post-closing trial balance.arrow_forwardHomework Question 10 of 11 Account Titles and Explanation Pharoah Company buys merchandise on account from Shamrock Company. The selling price of the goods is $1,385 and the cost of the goods sold is $650. Both companies use perpetual inventory systems. Journalize the transactions on the books of both companies. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Pharoah Shamrock (To record sale of merchandise) -/1 Debit = Credit :arrow_forwardExercise 1 The following were selected from among the transactions completed by Greco Co. during the current year. Greco Co. sells and installs home and business security systems. It uses the periodic inventory system and the allowance method in accounting for its uncollectible accounts receivables. Loaned P6,000 cash to Mark Tift, receiving a 90-day, 8% note. Jan 08 Feb 12 Purchased merchandise on account from Gwyn Co., list price P25,000. Trade discount 5%. Terms: 2/10, n/60. Mar 20 Wrote off a P1,000 account from Rodel Co as uncollectible. Apr 03 Sold merchandise on account to Messina and Son, P18,000. Terms: 3/5, 2/10, 1/15, n/45. Apr 08 Mark Tift dishonored the note. Apr 13 Issued a 60-day, 12% note for the Feb 12 transaction. Accepted a 30-day, 12% note for the Apr 03 transaction. May 18 Jun 07 Received from Mark Tift the amount owed on the dishonored note, plus interest from the date the note was dishonored until the payment date at 10% on the maturity value of the note. Settled…arrow_forward
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