Question

In this problem, we continue the accounting for Pure Water, Inc. from Chapter 3. On August 1, Pure Water, Inc., expanded its business and began selling and installing swimming pools and spas. The post-closing trial balance for Pure Water, Inc., as of July 31, 2012, is presented next.


The following transactions occurred during the month of August:
Aug 2 Paid the receptionist’s salary, which was accrued on July 31.
3 Purchased $22,500 of merchandise on account from the Tranquil Spa. Terms, 3/15, n/45, FOB shipping point.
5 Purchased $800 of supplies. Paid cash.
6 Paid freight charges of $400 related to the August 3 purchase.
8 Sold a spa for $5,500 (cost, $3,300) on account to J. Nelson. Terms, 1/15, n/30, FOB shipping point.
10 Purchased office furniture for $1,500. Paid cash.
11 Paid advertising expense, $600.
12 Returned a defective spa, which was purchased on August 3. Received a $2,000 credit from the Tranquil Spa.
13 Sold a spa for $6,700 (cost, $3,190) to a cash customer.
15 Granted J. Nelson a $200 allowance because of imperfections she detected upon receiving her spa.
16 Paid receptionist’s salary, $550.
17 Paid the Tranquil Spa the amount due from the August 3 purchase in full.
19 Purchased $10,000 of inventory on account from Apex Pools. Terms, 2/10, n/30, FOB destination.
21 Sold an above ground pool for $14,000 (cost, $8,500) on account to R. Jimenez. Terms, 2/10, n/30, FOB destination.
22 Received payment in full from J. Nelson for the August 8 sale.
24 Paid freight charges of $300 to have the pool sold to R. Jimenez on August 21 delivered.
25 Purchased equipment on account from Sonic City, Inc., for $4,000. Terms, n/30, FOB destination.
27 Received payment in full from R. Jimenez for the August 21 sale.
28 Paid in full the invoice from the August 19 purchase from Apex Pools.
30 Paid monthly utilities, $900.
31 Paid sales commissions of $1,700 to the sales staff.

Requirements
1. Journalize the transactions that occurred in August.
2. Using the four-column accounts from the Continuing Problem in Chapter 3, post the transactions to the ledger creating new ledger accounts as necessary; omit posting references. Calculate the new account balances.
3. Prepare the unadjusted trial balance for Pure Water, Inc., at August 31.
4. Journalize and post the adjusting entries for August based on the following adjustment information.
a. Record the expired rent.
b. Supplies on hand, $445.
c. Depreciation; $275 equipment, $245 furniture, $330 vehicles.
d. A physical count of inventory revealed $14,925 of inventory on hand.
5. Prepare an adjusted trial balance for Pure Water, Inc., at August 31.
6. Prepare the multi-step income statement and statement of retained earnings for the month ended August 31. Also, prepare a classified balance sheet at August 31.
7. Prepare and post-closing entries.
8. Prepare a post-closing trial balance at August31.


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  • CreatedApril 29, 2014
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