Comprehensive Problem 2

South Coast Boards Co. is a merchandising business. The account balances for South. Coast Boards Co. as of July 1, 2010 (unless otherwise indicated), are as follows:
. Net income: ?,800
110 112 115 116 117 123 124 210 211 310 311 312 313 Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Store Supplies Store Equipment Accum. Depr.Store Equip. Accounts Payable Salaries Payable Capital Stock Retained Earnings, Aug. 1, 2009 Dividends Income Summary

63,600 153,900 602,400 16,800 11,400 469,500 56,700 96,600 100,000 455,300 135,000

410 411 412 510 520 521 522 523 529 530 531 532 539

Sales Sales Returns & Allowances Sales Discounts Cost of Merchandise Sold Sales Salaries Expense Advertising Expense Depreciation Expense Store Supplies Expense Misc. Selling Expense Office Salaries Expense Rent Expense Insurance Expense Misc. Administrative Expense

$3,221,100 92,700 59,400 1,623,000 334,800 81,000

12,600 182,100 83,700 7,800

During July, the last month of the fiscal year, the following transactions were completed: July 1. Paid rent for July, $5,000. 3. Purchased merchandise on account from Belmont Co., terms 2/10, n/30, FOB shipping point, $40,000. 4. Paid freight on purchase of July 3, $600. 6. Sold merchandise on account to Modesto Co., terms 2/10, n/30, FOB shipping point, $25,000. The cost of the merchandise sold was $15,000. 7. Received $26,500 cash from Yuba Co. on account, no discount. 10. Sold merchandise for cash, $80,000. The cost of the merchandise sold was $50,000. 13. Paid for merchandise purchased on July 3, less discount. 14. Received merchandise returned on sale of July 6, $6,000. The cost of the merchandise returned was $4,500. 15. Paid advertising expense for last half of July, $7,500. 16. Received cash from sale of July 6, less return of July 14 and discount.

July 19. Purchased merchandise for cash, $36,000. 19. Paid $18,000 to Bakke Co. on account, no discount. 20. Sold merchandise on account to Reedley Co., terms 1/10, n/30, FOB shipping point, $40,000. The cost of the merchandise sold was $25,000. 21. For the convenience of the customer, paid freight on sale of July 20, $1,100. 21. Received $17,600' cash from Owen Co. on account, no discount. 21. Purchased merchandise on account from Nye Co., terms 1/10, n/30, FOB destination, $20,000. 24. Returned $2,000 of damaged merchandise purchased on July 21, receiving credit from the seller. 26. Refunded cash on sales made for cash, $3,000. The cost of the merchandise returned was $1,800. 28. Paid sales salaries of $22,800 and office salaries of $15,200. 29. Purchased store supplies for cash, $2,400. 30. Sold merchandise on account to Whitetail Co., terms 2/10, n/30, FOB shipping point, $18,750. The cost of the merchandise sold was $11,250. 30. Received cash from sale of July 20, less discount, plus freight paid on July 21, 31. Paid for purchase of July 21, less return of July 24 and discount.

31. Paid for purchase ot jury zL, Instructions 1. Enter the balances of each of the accounts in the appropriate balance column < four-column account. Write Balance in the item section, and place a check mark in the Posting Reference column. Journalize the transactions for July. 2. Post the journal to the general ledger, extending the month-end balances to the propriate balance columns after all posting is completed. In this problem, yon in not required to update or post to the accounts receivable and accounts payable :. sidiary ledgers. 3. Prepare an unadjusted trial balance. 4. At the end of July, the following adjustment data were assembled. Analyze and these data to complete (5) and (6).
a. b. c. d. e. Merchandise inventory on July 31 Insurance expired during the year Store supplies on hand on July 31 Depreciation for the current year Accrued salaries on July 31: Sales salaries Office salaries

$589,850
12,500 4,700 18,800

$4,400 2,700

7,100

5. Optional: Enter the unadjusted trial balance on a 10-column end-of-period spn-iu I sheet (work sheet), and complete the spreadsheet. See Appendix D for how to pic pare an end-of-period spreadsheet (work sheet) for a merchandising business. 6. Journalize and post the adjusting entries. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a retained earnings statement, and a balance shcvl, 9. Prepare and post the closing entries. Indicate closed accounts by inserting a lino in both the Balance columns opposite the closing entry. Insert the new balance in I lie retained earnings account. 10. Prepare a post-closing trial balance.