Problem - IV — Closing Entries The end of the period account balances after adjustments of Dryer Cleaners and Laundry are as follows: Account Balances (After Adjustments) Cash $ 9,000 Cleaning Supplies 3,500 Prepaid Rent 3,600 Equipment 128,000 Accumulated Depreciation—Equipment 20,000 Accounts Payable 8,500 Retained Earnings 6,400 Common Stoc 100,000 Dividends 8,000 Dry Cleaning Revenues 25,000 Laundry Revenues 4,000 Cleaning Supplies Expense 5,000 Depreciation Expense 3,000 Rent Expense 900 Salaries Expense 2,400 Utilities Expense 500 Instructions Prepare the end of the period closing entries for Dryer Cleaners and Laundry. You may omit journal entry explanations

 

Problem - V — Journal Entries

Prepare the necessary general journal entries for the month of May for Stringer Company for each situation given below. Stringer uses a perpetual inventory system.

Oct. 5 Paid operating expenses as follows: $4,000 Salaries Expense, $2,000 Rent Expense, $500 Utilities Expense.

Oct. 8 Purchased merchandise for $25,000 on account. Credit terms: 2/10, n/30.

Oct. 12 Borrowed $25,000 from Sun Bank signing an 8%, 6-month note.

Oct. 15 Returned defective merchandise with a cost of $3,500 and paid balance due for merchandise purchased on October 8. The company takes all discounts to which it is entitled.

Oct. 20 Sold merchandise for $20,000 to Adder Company on account. The cost of the merchandise sold was $12,000. Credit terms: 2/10, n/30.

Oct. 22 Purchased a 2-year insurance policy for $4,400 cash.

Oct. 25 Issued Credit Memo No. 3811 to Adder Company for $2,000 for merchandise returned by Adder from the sale on October 20. The cost of the merchandise returned was $1,025.

Oct. 29 Purchased office equipment for $15,000 paying $4,000 in cash and signing a 3-month, 11% note for the remainder.

 


Problem - VI — Multiple-Step Income Statement

 

Below is a partial listing of the adjusted account balances of Murray Department Store at year end

on December 31, 2005.

 

Accounts Receivable                                      $ 19,000

Cost of Goods Sold                                                    255,000

Selling Expenses (includes depreciation)                                35,000

Interest Expense                                                         1,000

Accumulated Depreciation—Building                                   10,000

Sales Discounts                                                           22,000

Merchandise Inventory                                               45,000

Administrative Expenses (includes depreciation)                   15,000

Sales                                                                330,000

Accounts Payable                                                       14,000

Interest Revenue                                                         800

 

Instructions

Using whatever data you believe appropriate, prepare a multiple-step income statement for Murray

Department Store for the year ended December 31, 2005

 


Problem - VII — Correcting Entries (12 points)

The following errors were made in journalizing and posting transactions in March in the Seal Company.

1. A $1,700 payment for a cash purchase of a 2-year insurance policy was debited to Prepaid Insurance and credited to Accounts Payable.

2. A collection of $4,500 on account from a customer was recorded as a debit to Cash $4,500 and a credit to Sales Revenue $4,500.

3. A bill for $1,550 for new office equipment was debited to Office Supplies $1,550 and credited to Accounts Payable $550.

4. The receipt of $800 from a customer for future service was recorded as a debit to Accounts Receivable $800 and a credit to Service Revenue $800.

 

Instructions

Prepare the correcting entries at May 31 assuming the incorrect entry is not reversed. (Omit

explanations.)

 

 

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