Question

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:

110 Cash $ 83,600
112 Accounts Receivable 233,900
115 Merchandise Inventory 624,400
116 Estimated Returns Inventory 28,000
117 Prepaid Insurance 16,800
118 Store Supplies 11,400
123 Store Equipment 569,500
124 Accumulated Depreciation-
Store Equipment 56,700
210 Accounts Payable 96,600
211 Salaries Payable ---
212 Customers Refunds Payable 50,000
310 Common Stock 100,000
311 Retained Earnings 585,300
312 Dividends 135,000
313 Income Summary ----
410 Sales 5,069,000
510 Cost of Merchandise Sold 2,823,000
520 Sales Salaries Expense 664,800
521 Advertising Expense 281,000
522 Depreciation Expense ---
523 Store Supplies Expense ---
529 Miscellaneous Selling Expense 12,600
530 Office Salaries Expense 382,100
531 Rent Expense 83,700
532 Insurance Expense ---
539 Miscellaneous Administrative
Expense 7,800
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.
20 Sold merchandise on account to Crescent Co., terms 1/10, n/30, FOB shipping point, $110,0000. The cost of the merchandise sold was $70,000.
21 For the convenience of Cresecent 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 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.
Required:
Enter the May 1 balances of each of the accounts in the appropriate balance column of a four-column account.
Enter May 1 in the date column. Write Balance in the item section, and place a check mark (?) in the Posting Reference column.

Answer 1

Palisade Creek Co.

Date Description Ref. Debit Credit

May 1 Cash 110 $ 83,600

May 1 Accounts Receivable 112 233,900

May 1 Merchandise Inventory 115 624,400

May 1 Estimated Returns Inventory 116 28,000

May 1 Prepaid Insurance 117 16,800

May 1 Store Supplies 118 11,400

May 1 Store Equipment 123 569,500

May 1 Accumulated Depreciation-

Store Equipment 124 56,700

May 1 Accounts Payable 210 96,600

May 1 Customers Refunds Payable 212 50,000

May 1 Common Stock 310 100,000

May 1 Retained Earnings 311 585,300

May 1 Dividends 312 135,000

May 1 Sales 410 5,069,000

May 1 Cost of Merchandise Sold 510 2,823,000

May 1 Sales Salaries Expense 520 664,800

May 1 Advertising Expense 521 281,000

May 1 Miscellaneous Selling Expense 529 12,600

May 1 Office Salaries Expense 530 382,100

May 1 Rent Expense 531 83,700

May 1 Miscellaneous Administrative

Expense 539 7,800

Total $5,957,600 $5,957,600

Step-by-step explanation:

The above account can be regarded as an Opening Journal for the month. The amounts for assets and expenses are listed on the debit side while the amounts for liabilities, equity, and revenue are listed on the credit side. In accordance with the accounting equation the two sides will always be equal. It is from this opening journal that the month's transactions are posted to reflect changes that occur in the month. The posting of the transactions are not required for this question.