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5.4 The following selected transactions were completed during August between Summit Company and Beartooth Co.:

Aug.

1

Summit Company sold merchandise on account to Beartooth Co., $48,000, terms 
FOB destination
, n/15. The 
cost of the goods sold
 was $28,800.

2

Summit Company paid freight of $1,150 for delivery of merchandise sold to Beartooth Co. on August 1.

5

Summit Company sold merchandise on account to Beartooth Co., $66,000, terms 
FOB shipping point
, n/eom. The cost of the goods sold was $40,000.

9

Beartooth Co. paid freight of $2,300 on August 5 purchase from Summit Company.

15

Summit Company sold merchandise on account to Beartooth Co., $58,700, terms FOB shipping point, n/45. Summit paid freight of $1,675, which was added to the invoice. The cost of the goods sold was $35,000.

16

Beartooth Co. paid Summit Company for purchase of August 1.

20

Summit Company paid Beartooth Co. a cash refund of $1,000 for defective merchandise purchased on August 1. Beartooth Co. kept the merchandise.

31

Beartooth Co. paid Summit Company on account for purchase of August 5.

31

Summit Company issued Beartooth Co. a credit memo for merchandise with an invoice amount of $4,000 that was returned from the August 15 sale. The cost of the merchandise returned was $2,500.

Required:

Journalize the August transactions for (1) Summit Company and (2) Beartooth Co.

Chart of Accounts-Summit Company

CHART OF ACCOUNTS

Summit Company

General Ledger

ASSETS

110

Cash

121

Accounts Receivable-Beartooth Co.

125

Notes Receivable

130

Inventory

131

Estimated Returns Inventory

140

Office Supplies

141

Store Supplies

142

Prepaid Insurance

180

Land

192

Store Equipment

193

Accumulated Depreciation-Store Equipment

194

Office Equipment

195

Accumulated Depreciation-Office Equipment

LIABILITIES

210

Accounts Payable

216

Salaries Payable

218

Sales Tax Payable

219

Customer Refunds Payable

221

Notes Payable

EQUITY

310

Common Stock

311

Retained Earnings

312

Dividends

REVENUE

410

Sales

610

Interest Revenue

EXPENSES

510

Cost of Goods Sold

521

Delivery Expense

522

Advertising Expense

524

Depreciation Expense-Store Equipment

525

Depreciation Expense-Office Equipment

526

Salaries Expense

531

Rent Expense

533

Insurance Expense

534

Store Supplies Expense

535

Office Supplies Expense

536

Credit Card Expense

539

Miscellaneous Expense

710

Interest Expense

Chart of Accounts-Beartooth Co.

CHART OF ACCOUNTS

Beartooth Co.

General Ledger

ASSETS

110

Cash

120

Accounts Receivable

125

Notes Receivable

130

Inventory

131

Estimated Returns Inventory

140

Office Supplies

141

Store Supplies

142

Prepaid Insurance

180

Land

192

Store Equipment

193

Accumulated Depreciation-Store Equipment

194

Office Equipment

195

Accumulated Depreciation-Office Equipment

LIABILITIES

211

Accounts Payable-Summit Company

216

Salaries Payable

218

Sales Tax Payable

219

Customer Refunds Payable

221

Notes Payable

EQUITY

310

Common Stock

311

Retained Earnings

312

Dividends

REVENUE

410

Sales

610

Interest Revenue

EXPENSES

510

Cost of Goods Sold

521

Delivery Expense

522

Advertising Expense

524

Depreciation Expense-Store Equipment

525

Depreciation Expense-Office Equipment

526

Salaries Expense

531

Rent Expense

533

Insurance Expense

534

Store Supplies Expense

535

Office Supplies Expense

536

Credit Card Expense

539

Miscellaneous Expense

710

Interest Expense

General Journal-Summit Company

(1) Journalize the August transactions for Summit Company.



General Journal Instructions

PAGE 10

JOURNAL

ACCOUNTING EQUATION

DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

ASSETS

LIABILITIES

EQUITY

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

General Journal-Beartooth Co.

(2) Journalize the August transactions for Beartooth Co.



General Journal Instructions

PAGE 15

JOURNAL

ACCOUNTING EQUATION

DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

ASSETS

LIABILITIES

EQUITY

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

5.5

The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 20Y2:

Cash

$240,000

Accounts receivable

966,000

Inventory

1,690,000

Estimated returns inventory

22,500

Office supplies

13,500

Prepaid insurance

8,000

Office equipment

830,000

Accumulated depreciation-office equipment

550,000

Store equipment

3,600,000

Accumulated depreciation-store equipment

1,820,000

Accounts payable

321,000

Salaries payable

41,500

Customer refunds payable

40,000

Estimated coupons payable

5,000

Note payable (final payment due in 6 years)

300,000

Common stock

500,000

Retained earnings

2,949,100

Dividends

100,000

Sales

11,343,000

Cost of goods sold

7,850,000

Sales salaries expense

916,000

Advertising expense

550,000

Depreciation expense-store equipment

140,000

Miscellaneous selling expense

38,000

Office salaries expense

650,000

Rent expense

94,000

Depreciation expense-office equipment

50,000

Insurance expense

48,000

Office supplies expense

28,100

Miscellaneous administrative expense

14,500

Interest expense

21,000

Required:

1.

Prepare a multiple-step income statement.

2.

Prepare a statement of stockholders’ equity. Additional common stock of $75,000 was issued during the year ended May 31, 20Y2.

3.

Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.

4.

Briefly explain how multiple-step and 


single-step income statements


 differ.

Labels and Amount Descriptions



Labels

Administrative expenses

Current assets

Current liabilities

For the Year Ended May 31, 20Y2

Long-term liabilities

May 31, 20Y2

Operating expenses

Other revenue and expense

Property, plant, and equipment

Selling expenses



Amount Descriptions

Balances, June 1, 20Y1

Balances, May 31, 20Y2

Book value-office equipment

Book value-store equipment

Dividends

Gross profit

Issued common stock

Net income

Net loss

Note payable (current portion)

Operating income

Total administrative expenses

Total assets

Total current assets

Total current liabilities

Total liabilities

Total liabilities and stockholders’ equity

Total operating expenses

Total property, plant, and equipment

Total selling expenses

Total stockholders’ equity

Income Statement

1. Prepare a multiple-step income statement.



Income Statement Instructions

Clairemont Co.

Income Statement

1

 

 

2

 

 

3

 

 

4

 

 

 

5

 

 

 

6

 

 

7

 

 

8

 

 

9

 

 

10

 

 

11

 

 

 

12

 

 

13

 

 

14

 

 

15

 

 

16

 

 

17

 

 

18

 

 

19

 

 

20

 

 

21

 

 

 

22

 

 

23

 

 

Statement of Stockholders’ Equity

2. Prepare a statement of stockholders’ equity. Additional common stock of $75,000 was issued during the year ended May 31, 20Y2.



Statement of Stockholders’ Equity Instructions

Clairemont Co.

Statement of Stockholders’ Equity

1

 

Common Stock

Retained Earnings

Total

2

3

4

5

6

Balance Sheet

3. Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.



Balance Sheet Instructions

Clairemont Co.

Balance Sheet

1

Assets

 

 

 

2

 

 

 

3

 

 

4

 

 

5

 

 

6

 

 

7

 

 

8

 

 

9

 

 

10

 

 

 

11

 

 

12

 

 

13

 

 

14

 

 

15

 

 

16

 

 

17

 

 

18

 

 

19

Liabilities

 

 

 

20

 

 

 

21

 

 

22

 

 

23

 

 

24

 

 

25

 

 

26

 

 

27

 

 

 

28

 

 

29

 

 

30

Stockholders’ Equity

 

 

 

31

 

 

32

 

 

33

 

 

34

 

 

Final Question

Briefly explain how multiple-step and single-step income statements differ.

Which type of income statement shows intermediate balances?

Multiple-step

Single-step

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