Purple Inc. is a merchandising business headquartered in the U.S. and selling primarily to wholesalers. The accounting information system is based upon the principles and rules of U.S. Generally Accepted Accounting Principles (GAAP). Business activity is recorded on an accrual basis. The company employs the perpetual inventory system in accounting for its merchandise inventory. Sales revenue is recorded net of sales discounts. Purchases of inventory are also recorded net of purchases discounts. The company operates using a January through December fiscal year. The balances of the accounts in the general ledger as of November 30 of the current fiscal year are as follows:

110	cash	33890
111	accounts receivable	192100
112	inventory	256400
113	estimated returns inventory	8100
114	supplies	12900
115	prepaid insurance	30000
120	land	140000
121	equipment	897100
122	accumulated depreciation-equip.		229600
210	accounts payable		42810
211	customer refunds payable		25200
212	salaries payable		0
213	interest payable		0
214	unearned rent		33200
220	notes payable (final payment due in 4 years)		50000
310	common stock, $1 par		100000
311	retained earnings		499560
312	dividends	75000
313	income summary	0
410	sales		4279530
510	cost of goods sold	2150410
520	sales salaries expense	650600
521	advertising expense	220000
522	delivery expense	36000
523	rent expense	125000
524	miscellaneous selling expense	42800
530	office salaries expense	357000
531	depreciation expense-equip.	29600
532	insurance expense	0
533	supplies expense	0
610	rent revenue		0
710	interest expense	3000

There are 100,000 shares of common stock outstanding. During December, the last month of the fiscal year, the following transactions were completed:

Dec. 4	Purchased $19,800 of merchandise on account, FOB shipping point, terms 3/10,n/30.
5	Paid transportation costs of $395 on the December 4 purchase.
9	Returned $2,500 of the merchandise purchased on December 4.
11	Sold merchandise on account, $20,240, FOB destination, 2/15,n/45. The cost of the merchandise sold was $12,350.
12	Paid transportation charges of $710 for the merchandise sold on December 11.
13	Paid for the purchase of December 4 less the return and the discount.
15	Received payment from customers on account, $13,910. Amount received is net of discount.
22	Received payment on account for the sale of December 11, less the discount.
23	Purchased supplies on account, n/30 $1,150.
26	Paid amounts owed to creditors on account, $11,080. Amount paid was net of discount.
27	Paid sales salaries, $2,900, and office salaries, $1,700.
28	Sold merchandise for cash, $8,200. The cost of the merchandise sold was $5,130.
29	Paid customer a cash refund of $3,210 for returned merchandise from the sale of Dec. 11. The cost of the returned merchandise was $1,975.
30	Paid rent for store equipment for December, $1,300.
31	Paid cash for a web page advertisement, $2,060.

1. Enter the balances of each of the accounts as of November 30 in the appropriate balance column of a T account (use account names and numbers) or a four-column account. (You are creating the General Ledger).

2. Journalize (using the General Ledger) the transactions for December.

3. Post the December journal entries to the General Ledger, computing the year-end balances after all

posting is completed.

4. Prepare an Unadjusted Trial Balance as of December 31.

5. Analyze the following adjustment data assembled at the end of December. Use the adjustment data to

journalize, then post, the necessary adjusting entries.

a.	Merchandise inventory on hand at December 31, per physical count, $250,465.
b.	Insurance coverage expired during the year, $20,100.
c.	Supplies on hand at December 31, $4,820.
d.	Additional depreciation to be recorded on the equipment for the year, $13,500.
e.	Accrued sales salaries $1,800 and accrued office salaries $890 on December 31.
f.	Accrued interest on the note payable as of December 31, $410.
g.	Unearned Rent at December 31 is $8,300.
h.	Company estimates that customers will request an additional $13,015 of refunds related to current year sales and the related merchandise to be costing $6,210 will be returned.

6. Prepare an Adjusted Trial Balance as of December 31.

7. Prepare, in good form, a multiple-step Income Statement, a Retained Earnings Statement, and a

classified Balance Sheet at the end of the December 31 fiscal year. Retained earnings as of 11/30

equaled retained earnings as of beginning of the fiscal year (1/1).

8. Journalize and post the necessary closing entries.

9. Prepare a Post-Closing Trial Balance as of December 31.

Answer rating: 100% (QA)

TAccount Balances as of November 30 110 Cash 33890 111 Accounts Receivable 192100 112 Inventory 256400 113 Estimated Returns Inventory 8100 114 Supplies 12900 115 Prepaid Insurance 30000 120 Land 1400... View the full answer