Palisade Creek Co. is a retail business that uses the perpetual inventory system. The account balances for Palisade Creek as of May 1, 20Y6 (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.

May 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 goods 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 goods 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:

May 20. Sold merchandise on account to Crescent Co., terms 1/10, n/30, FOB shipping point, $110,000. The cost of the goods 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.

21. Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB destination, $88,000.

24. Returned 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 goods 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 May, 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 goods sold.

5. Enter the unadjusted trial balance on a 10-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 stockholders’ equity, and a balance sheet. Assume that additional common stock of $10,000 was issued in January 20Y6.

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 retained earnings account.

10. Prepare a post-closing trial balance.

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312 Dividends 410 Sales 510 Cost of Goods Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense 523 Store Supplies Expense 529 Miscellaneous Selling Expense 530 Office Salaries Expense 531 Rent Expense 532 Insurance Expense 539 Miscellaneous Administrative Expense $ 135,000 110 Cash 112 Accounts Receivable $ 83,600 233,900 5,069,000 2,823,000 115 Inventory 116 Estimated Returns Inventory 117 Prepaid Insurance 118 Store Supplies 123 Store Equipment 124 Accumulated Depreciation- Store Equipment 210 Accounts Payable 211 Salaries Payable 212 Customers Refunds Payable 310 Common Stock 311 Retained Earnings 624,400 664,800 28,000 16,800 11,400 281,000 569,500 12,600 382,100 56,700 96,600 83,700 50,000 7,800 100,000 585,300 a. Inventory on May 31 b. Insurance expired during the year c. Store supplies on hand on May 31 d. Depreciation for the current year e. Accrued salaries on May 31: Sales salaries Office salaries $570,000 12,000 4,000 14,000 $7,000 6,600 13,600 a. Inventory on May 31 b. Insurance expired during the year c. Store supplies on hand on May 31 d. Depreciation for the current year e. Accrued salaries on May 31: Sales salaries Office salaries $570,000 12,000 4,000 14,000 $7,000 6,600 13,600