A+ Work

COMPREHENSIVE PROBLEM AFTER CHAPTER 6

COMPLETING A MERCHANDISER'S ACCOUNTING CYCLE

The end-of-month trial balance of Lake Placid Building Materials, Inc., at January 31 of the current year follows:

LAKE PLACID BUILDING MATERIALS, INC.

TRIAL BALANCE

JANUARY 31, 20XX

      Balance

Account

#

Account Debit Credit

    Cash       6,430.00  

    Accounts receivable     19,090.00  

    Inventory     65,400.00  

    Supplies       2,700.00  

    Building   188,170.00  

    Accumulated depreciation-building       36,000.00

    Fixtures     45,600.00  

    Accumulated depreciation-fixtures         5,800.00

    Accounts payable       28,300.00

    Salary payable   

    Interest payable   

    Unearned sales revenue         6,560.00

    Note payable, long-tem       87,000.00

    Common stock       20,000.00

    Retained earnings     124,980.00

    Dividends       9,200.00  

    Sales revenue     177,970.00

    Sales discounts        7,300.00  

    Sales returns and allowances       8,140.00  

    Cost of goods sold   103,000.00  

    Selling expense      21,520.00  

    General expense     10,060.00  

    Interest expense   

    Total   486,610.00    486,610.00 

Additional data at January 31, 20XX:

a. Supplies consumed during the month, $1,500. Half is selling expense, and the other half  is general expense. 

b. Depreciation for the month: building, $4,000; fixtures, $4,800. One-fourth of

depreciation is selling expense, and three-fourths is general expense. 

c. Unearned sales revenue still unearned, $1,200.                                          

      d.   Accrued salaries, a general expense, $1,150.

      e.   Accrued interest expense, $780.

      f.  Inventory on hand, $63,720.

Required:.   .  . . . . .  . .    . .

1. Using four-column accounts, open the accounts listed on the trial balance, inserting their . unadjusted balances. Date the balances of the following accounts January 1: Supplies; Building; Accumulated Depreciation-Building; Fixtures; Accumulated Depreciation­Fixtures; Unearned Sales Revenue; and Retained Earnings.  Date the balance of Dividends, January 31.

2. Prepare the adjusted trial balance for the month ended January 31 of the current year.  Lake Placid groups all operating expense under two accounts, Selling Expense and General Expense.  Leave two blank lines under Selling Expense and three blank lines under General Expense.

3. Journalize the adjusting entries at January 31.

4. Post the adjusting entries.

5. Prepare the company's multiple-step income statement and statement of retained earnings for the month ended January 31 of the current year. Also prepare the classified balance sheet.  

6. Journalize the closing entries at January 31.

7. Post the closing entries. 

8. ComputeLake Placid's current ratio and debt ratio at January 31, and compare these values with the industry averages of 1.9 for the current ratio and 0.57 for the debt ratio.  Compute the gross margin percentage and the rate of inventory turnover for the month (the inventory balance at the end of December was $67,100), and compare these ratio values with the industry average of 0.26 for the gross margin ratio and 1.0 for inventory turnover.  Does Lake Placid Building Materials appear to be stronger or weaker than the average company in the building materials

industry?