ocean atlantic co is a merchandising business the account balances for ocean atlanti 551463 | Homework Solutions

Ocean Atlantic Co. is a merchandising business. The account balances for Ocean Atlantic Co. as of July 1, 2012 (unless otherwise indicated), are as follows:

110

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Cash

$63,600

112

Accounts Receivable

153,900

115

Merchandise Inventory

602,400

116

Prepaid Insurance

16,800

117

Store Supplies

11,400

123

Store Equipment

469,500

124

Accumulated Depreciation—Store Equipment

56,700

210

Accounts Payable

96,600

211

Salaries Payable

—

310

Kevin Gilmour, Capital, August 1, 2011

555,300

311

Kevin Gilmour, Drawing

135,000

312

Income Summary

—

410

Sales

3,221,100

411

Sales Returns and Allowances

92,700

412

Sales Discounts

59,400

510

Cost of Merchandise Sold

1,623,000

520

Sales Salaries Expense

334,800

521

Advertising Expense

81,000

522

Depreciation Expense

—

523

Store Supplies Expense

—

529

Miscellaneous Selling Expense

12,600

530

Office Salaries Expense

182,100

531

Rent Expense

83,700

532

Insurance Expense

—

539

Miscellaneous Administrative Expense

7,800

During July, the last month of the fiscal year, the following transactions were completed:

July 1.

Paid rent for July, $4,000.

3.

Purchased merchandise on account from Lingard Co., terms 2/10, n/30, FOB

shipping point, $25,000.

4.

Paid freight on purchase of July 3, $1,000.

6.

Sold merchandise on account to Holt Co., terms 2/10, n/30, FOB shipping

point, $40,000. The cost of the merchandise sold was $24,000.

7.

Received $18,000 cash from Flatt Co. on account, no discount.

10.

Sold merchandise for cash, $90,000. 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, $7,000. The cost of the

merchandise returned was $4,500.

15.

Paid advertising expense for last half of July, $9,000.

16.

Received cash from sale of July 6, less return of July 14 and discount.

19.

Purchased merchandise for cash, $22,000.

19.

Paid $23,100 to Carino 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 Munson Co., terms 1/10, n/30, FOB

destination, $32,000.

July 24.

Returned $5,000 of damaged merchandise purchased on July 21, receiving

credit from the seller.

26.

Refunded cash on sales made for cash, $12,000. The cost of the merchandise

returned was $7,200.

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 Dix 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.

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 (v) in the Posting Reference column. Journalize the transactions for July 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 July, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).

a.

Merchandise inventory on July 31

$565,000

b.

Insurance expired during the year

13,400

c.

Store supplies on hand on July 31

3,900

d.

Depreciation for the current year

11,500

e.

Accrued salaries on July 31:

Sales salaries

$3,200

Office salaries

1,300

4,500

5. Optional: 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 owner’s equity, and a balance sheet.

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 owner’s capital account.

10. Prepare a post-closing trial balance.

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