Accounting Homework

1. Franklin Craft Store completed the following merchandising transactions in the month of October. At the beginning of October, Franklin’s ledger showed Cash of $8,000 and Franklin, Capital of $8,000.

Oct. 1 Purchased merchandise on account from Michael’s Wholesale Supply for$4,800, terms 1/10, n/30.

2 Sold merchandise on account for $3,900, terms 2/10, n/30. The cost of the merchandise sold was $2,400.

5 Received credit from Michael’s Wholesale Supply for merchandise returned $600.

9 Received collections in full, less discounts, from customers billed on sales of $3,900 on October 2.

10 Paid Michael’s Wholesale Supply in full, less discount.

11 Purchased supplies on account for $750.

12 Purchased merchandise for cash $2,100.

15 Received $200 refund for return of poor-quality merchandise from supplier on cash purchase.

17 Purchased merchandise on account from Handiwork Distributors for $2,500, terms 2/10, n/30.

19 Paid freight on October 17 purchase $310.

24 Sold merchandise for cash $6,900. The cost of the merchandise sold was $4,510.

25 Purchased merchandise on account from Hobbytown Inc. for $1,000, terms 3/10, n/30.

27 Paid Handiwork Distributors in full, less discount.

29 Made refunds to cash customers for returned merchandise $190. The returned merchandise had cost $134.

31 Sold merchandise on account for $1,460, terms 1/10, n/30. The cost of the merchandise sold was $950.

Franklin Craft’s chart of accounts includes Cash, Accounts Receivable, Merchandise Inventory, Supplies, Accounts Payable, Franklin, Capital, Sales, Sales Returns and Allowances, Sales Discounts, and Cost of Goods Sold.

Instructions

(a) Journalize the transactions in a general journal using a perpetual inventory system.

2. The Welcome Inn opened for business on March 1, 2012. Here is its trial balance before adjustment on March 31.

WELCOME INN

Trial Balance

March 31, 2012

Debit Credit

Cash $ 2,700

Prepaid Insurance 2,400

Supplies 3,300

Land 25,000

Lodge 85,000

Furniture 22,400

Accounts Payable $ 9,200

Unearned Rent Revenue 2,800

Mortgage Payable 50,000

Owner’s Capital 72,000

Rent Revenue 11,000

Salaries Expense 3,000

Utilities Expense 800

Advertising Expense 400

$145,000 $145,000

Other data:

1. Insurance expires at the rate of $400 per month.

2. An inventory of supplies shows $1,900 of unused supplies on March 31.

3. Annual depreciation is $4,440 on the lodge and $3,600 on furniture.

4. The mortgage interest rate is 9%.  [($50,000 X 9%) X 1/12] =

5. Unearned rent of $1,300 has been earned.

6. Salaries of $960 are accrued and unpaid at March 31.

Instructions

(a) Journalize the adjusting entries on March 31. (A blank journal is available in Doc Sharing)

(b) Prepare a ledger using T accounts. Enter the trial balance amounts prior to adjustments and post the

adjusting entries. You will need to include all 23 ledger accounts (see below).

(c) Prepare an adjusted trial balance on March 31.

(d) Prepare the closing entries for March 31.

Note: if you have Excel on your computer, you can type into the cells by double clicking on the template.

CASHPREPAID INSURANCESUPPLIESLAND

DrCrDrCrDrCrDrCr

LODGEACCUM DEPRECIATION LODGEFURNITUREACCUM DEPRECIATION FURNITURE

DrCrDrCrDrCrDrCr

ACCOUNTS PAYABLEUNEARNED RENT REVENUESALARIES PAYABLEINTEREST PAYABLE

DrCrDrCrDrCrDrCr

MORTGAGE PAYABLEOWNER'S CAPITALRENT REVENUESALARIES EXPENSE

DrCrDrCrDrCrDrCr

UTLITIES EXPENSEADVERTISING EXPENSEINTEREST EXPENSEINSURANCE EXPENSE

DrCrDrCrDrCrDrCr

SUPPLIES EXPENSEDEPRECIATION-LODGEDEPRECIATION FURNITURE

DrCrDrCrDrCr

Sheet1

Dr	Cr		Dr	Cr		Dr	Cr		Dr	Cr
			Dr	Cr		Dr	Cr		Dr	Cr
Dr	Cr		Dr	Cr		Dr	Cr		Dr	Cr
Dr	Cr		Dr	Cr		Dr	Cr		Dr	Cr
Dr	Cr		Dr	Cr		Dr	Cr		Dr	Cr

Sheet2

CASH			PREPAID INSURANCE			SUPPLIES			LAND
Dr	Cr		Dr	Cr		Dr	Cr		Dr	Cr
LODGE			ACCUM DEPRECIATION LODGE			FURNITURE			ACCUM DEPRECIATION FURNITURE
Dr	Cr		Dr	Cr		Dr	Cr		Dr	Cr
ACCOUNTS PAYABLE			UNEARNED RENT REVENUE			SALARIES PAYABLE			INTEREST PAYABLE
Dr	Cr		Dr	Cr		Dr	Cr		Dr	Cr
MORTGAGE PAYABLE			OWNER'S CAPITAL			RENT REVENUE			SALARIES EXPENSE
Dr	Cr		Dr	Cr		Dr	Cr		Dr	Cr
UTLITIES EXPENSE			ADVERTISING EXPENSE			INTEREST EXPENSE			INSURANCE EXPENSE
Dr	Cr		Dr	Cr		Dr	Cr		Dr	Cr
SUPPLIES EXPENSE			DEPRECIATION-LODGE			DEPRECIATION FURNITURE
Dr	Cr		Dr	Cr		Dr	Cr

Sheet3