Assume it is Monday, May 1, 2011, the first business day of the month, and you have just been hired...

Question

Assume it is Monday, May 1, 2011, the first business day of the month, and you have just been hired as the accountant for Colo Company, which operates with monthly accounting periods. All of the company’s accounting work is completed through the end of April and its ledgers show April 30 balances. During your first month on the job, the company experiences the following transactions and events (terms for all its credit sales are 2/10, n/30 unless stated differently):

May 1	Issued Check No. 3410 to S&P Management Co. in payment of the May rent, $2,830. (Use two lines to record the transaction. Charge 70% of the rent to Rent Expense-Selling Space and the balance to Rent Expense-Office Space.)
2	Sold merchandise on credit to Hensel Company, Invoice No. 8785, for $6,500 (cost is $4,500).
2	Issued a $200 credit memorandum to Knox Co., for defective (worthless) merchandise sold on April 28 and returned for credit. The total selling price (gross) was $4,800.
3	Received a $750 credit memorandum from Peyton Products for the return of merchandise purchased on April 29.
4	Purchased the following on credit from Gear Supply Co.: merchandise, $36,272; store supplies, $587; and office supplies, $76. Invoice dated May 4, terms n/10 EOM.
5	Received payment from Knox Co., for the balance from the April 28 sale less the May 2 return and the discount.
8	Issued Check No. 3411 to Peyton Products to pay for the $6,100 of merchandise purchased on April 29 less the May 3 return and a 2% discount.
9	Sold store supplies to the merchant next door at their cost of $372 cash.
10	Purchased $4,400 of office equipment on credit from Gear Supply Co., invoice dated May 10, terms n/10 EOM.
11	Received payment from Hensel Company for the May 2 sale less the discount.
11	Purchased $9,400 of merchandise from Garcia, Inc., invoice dated May 10, terms 2/10, n/30.
12	Received an $900 credit memorandum from Gear Supply Co. for the return of defective office equipment received on May 10.
15	Issued Check No. 3412, payable to Payroll, in payment of sales salaries, $5,320, and office salaries, $4,550. Cashed the check and paid the employees.
15	Cash sales for the first half of the month are $60,120 (cost is $48,000). (Cash sales are recorded daily but are recorded only twice here to reduce repetitive entries.)
15	Post to the customer and creditor accounts. Also post individual items that are not included in column totals at the end of the month to the general ledger accounts. (Such items are posted daily but are posted only twice each month because they are few in number.)
16	Sold merchandise on credit to Hensel Company, Invoice No. 8786, for $4,900 (cost is $2,800).
17	Purchased $13,150 of merchandise from Fink Corp., invoice dated May 14, terms 2/10, n/60.
19	Issued Check No. 3413 to Garcia, Inc., in payment of its May 10 invoice less the discount.
22	Sold merchandise to Lee Services, Invoice No. 8787, for $7,500 (cost is $5,640), terms 2/10, n/60.
23	Issued Check No. 3414 to Fink Corp. in payment of its May 14 invoice less the discount.
24	Purchased the following on credit from Gear Supply Co.: merchandise, $9,020; store supplies, $690; and office supplies, $277. Invoice dated May 24, terms n/10 EOM.
25	Purchased $3,300 of merchandise from Peyton Products, invoice dated May 23, terms 2/10, n/30.
26	Sold merchandise on credit to Crane Corp., Invoice No. 8788, for $14,600 (cost is $8,620).
26	Issued Check No. 3415 to Perennial Power in payment of the May electric bill, $1,272.
29	The owner of Colo Company, Jenny Colo, used Check No. 3416 to withdraw $6,700 cash from the business for personal use.
30	Received payment from Lee Services for the May 22 sale less the discount.
30	Issued Check No. 3417, payable to Payroll, in payment of sales salaries, $5,320, and office salaries, $4,550. Cashed the check and paid the employees.
31	Cash sales for the last half of the month are $66,500 (cost is $42,350).
31	Post to the customer and creditor accounts. Also post individual items that are not included in column totals at the end of the month to the general ledger accounts. Foot and crossfoot the journals and make the month-end postings.

Following accounting adjustments are also available:

a.	Expired insurance, $546.
b.	Ending store supplies inventory, $2,646.
c.	Ending office supplies inventory, $507.
d.	Depreciation of store equipment, $564.
e.	Depreciation of office equipment, $322.

Assume that Colo Co. uses the perpetual inventory system. Following opening balances are available for
the month of May, 2011.

Balance
Cash	$	50,247
Accounts Receivable	4,800
Merchandise Inventory	221,780
Office Supplies	510
Store Supplies	2,467
Prepaid Insurance	3,508
Office Equipment	22,870
Accumulated Depreciation–Office Equipment	9,778
Store Equipment	39,120
Accumulated Depreciation–Store Equipment	16,606
Accounts Payable	6,100
Jenny Colo, Capital	312,818

Required:

1.1

Enter these transactions in a sales journal.(Record the transactions in the given order. Omit the "$" sign in your response.)

SALES JOURNAL
Date	Account Debited	Invoice Number	Accounts Receivable Dr. Sales Cr.	Cost of Goods Sold Dr. Inventory Cr.

Totals

1.2

Enter these transactions in a purchases journal.(Record the transactions in the given order. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

PURCHASES JOURNAL
Date	Account Debited	Date of Invoice	Terms	Accounts Payable Cr.	Merchandise Inventory Dr.	Office Supplies Dr.	Other Accounts Dr.

Totals

1.3

Enter these transactions in a cash receipts journal.(Record the transactions in the given order. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

CASH RECEIPTS JOURNAL
Date	Account Credited	Cash Dr.	Sales Discount Dr.	Accounts Receivable Cr.	Sales Cr.	Other Accts. Cr.	Cost of Goods Sold Dr. Inventory Cr.

Totals

1.4

Enter these transactions in a cash disbursements journal.(Record the transactions in the given order. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

CASH DISBURSEMENTS JOURNAL
Date	Ck. No.	Payee	Account Debited	Cash Cr.	Merchandise Inventory Cr.	Other Accounts Dr.	Accounts Payable Dr.

Totals

1.5

Prepare the general journal.(Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
May 2
3
12

2.1

Prepare the adjusting entries.(Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
a.
b.
c.
d.
e.

2.2

Prepare the closing entries.(Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
May 31
May 31
May 31
May 31

2.3

Prepare a trial balance in the Trial Balance columns of the work sheet form provided below using the information for accounting adjustments for the month ended May 31, 2011.(Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

COLO COMPANY
Work Sheet for Month Ended May 31, 2011
Unadjusted Trial Balance	Adjustments	Income Statement	Balance Sheet or Statement of Owner’s Equity

Account	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash
Accounts receivable
Merchandise inventory
Office supplies
Store supplies
Prepaid insurance
Office equipment
Accum. depr.–Office equipment
Store equipment
Accumulated depr.–Store equip
Accounts payable
Jenny Colo, Capital
Jenny Colo, Withdrawals
Sales
Sales discounts
Sales returns and allowances
Cost of goods sold
Depr. Expense–Office equipment
Depr. Expense–Store equipment
Office salaries expense
Sales salaries expense
Insurance expense
Rent expense, office space
Rent expense, selling space
Office supplies expense
Store supplies expense
Utilities expense

Totals

Net income

Totals

2.4

Post the entries into the following ledger accounts.(Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

GENERAL LEDGER
Cash
Date	Debit	Credit	Balance
Apr.	30
May	31
31

Accounts Receivable
Date	Debit	Credit	Balance
Apr.	30
May	2
31
31

Merchandise Inventory
Date	Debit	Credit	Balance
Apr.	30
May	3
31	Purchase discount
31
31	Cash sales
31	Credit sales

Office Supplies
Date	Debit	Credit	Balance
Apr.	30
May	31
31

Store Supplies
Date	Debit	Credit	Balance
Apr.	30
May	4
9
24
31

Prepaid Insurance
Date	Debit	Credit	Balance
Apr.	30
May	31

Office Equipment
Date	Debit	Credit	Balance
Apr.	30
May	10
12

Accumulated Depreciation–Office Equipment
Date	Debit	Credit	Balance
Apr.	30
May	31

Store Equipment
Date	Debit	Credit	Balance
Apr.	30

Accumulated Depreciation–Store Equipment
Date	Debit	Credit	Balance
Apr.	30
May	31

Accounts Payable
Date	Debit	Credit	Balance
Apr.	30
May	3
12
31
31

Jenny Colo, Capital
Date	Debit	Credit	Balance
Apr.	30
May	31
31

Jenny Colo, Withdrawals
Date	Debit	Credit	Balance
May	29
31

Sales
Date	Debit	Credit	Balance
May	31	Credit sales
31	Cash sales
31

Sales Returns and Allowances
Date	Debit	Credit	Balance
May	2
31

Sales Discounts
Date	Debit	Credit	Balance
May	31
31

Cost of Goods Sold
Date	Debit	Credit	Balance
May	31	Credit sales
31	Cash sales
31

Depreciation Expense—Office Equipment
Date	Debit	Credit	Balance
May	31
31

Depreciation Expense—Store Equipment
Date	Debit	Credit	Balance
May	31
31

Office Salaries Expense
Date	Debit	Credit	Balance
May	15
30
31

Sales Salaries Expense
Date	Debit	Credit	Balance
May	15
30
31

Insurance Expense
Date	Debit	Credit	Balance
May	31
31

Rent Expense, Office Space
Date	Debit	Credit	Balance
May	1
31

Rent Expense, Selling Space
Date	Debit	Credit	Balance
May	1
31

Office Supplies Expense
Date	Debit	Credit	Balance
May	1
31

Store Supplies Expense
Date	Debit	Credit	Balance
May	31
31

Utilities Expense
Date	Debit	Credit	Balance
May	26
31

Income Summary
Date	Debit	Credit	Balance
May	31
31	(Expenses)
31	(J. Colo Capital)

ACCOUNTS RECEIVABLE LEDGER
Crane Corp.
Date	Debit	Credit	Balance
May	26

Hensel Company
Date	Debit	Credit	Balance
May	2
11
16

Knox, Inc.
Date	Debit	Credit	Balance
Apr.	28
May	2
5

Lee Services
Date	Debit	Credit	Balance
May	22
30

ACCOUNTS PAYABLE LEDGER
Fink Corp.
Date	Debit	Credit	Balance
May	17
23

Garcia, Inc.
Date	Debit	Credit	Balance
May	11
19

Peyton Products
Date	Debit	Credit	Balance
Apr.	29
May	3
8
25

Gear Supply Co.
Date	Debit	Credit	Balance
May	4
10
12
24

3.1

Prepare a May 2011 multiple-step income statement.(Input all amounts as positive values. Omit the "$" sign in your response.)

COLO COMPANY Income Statement For Month Ended May 31, 2011
Revenue
$
$

Net sales

Operating expenses
Selling expenses

Total selling expenses
General and administrative expenses

Total general and administrative expenses

Total operating expenses

$

3.2

Prepare a May 2011 statement of owner’s equity.(Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

COLO COMPANY

Statement of Owner’s Equity

For Month Ended May 31, 2011

$

3.3

Prepare a May 2011 classified balance sheet.(Input all amounts as positive values. Be sure to list assets and liabilities in order of their liquidity. Omit the "$" sign in your response.)

COLO COMPANY Balance Sheet May 31, 2011
Assets
Current Assets
$

Total Current Assets	$
Plant Assets


Total Plant Assets

Total Assets	$

Liabilities
Current Liabilities
$
Equity

Total Liabilities and Equity	$

4.	Prepare a post-closing trial balance for the month ended May 31, 2011.(The items in the Trial Balance should be grouped as follows: Assets (in order of their liquidity), Liabilities (in order of their liquidity) and Equity. Omit the "$" sign in your response.)

COLO COMPANY
Post-Closing Trial Balance
May 31, 2011
Debit	Credit
$
$

Totals	$	$

4.2

Prepare a schedules of accounts receivable.(Omit the "$" sign in your response.)

COLO COMPANY
Schedule of Accounts Receivable
May 31, 2011
$

Total accounts receivable	$

4.3

Prepare a schedules of accounts payable.(Omit the "$" sign in your response.)

COLO COMPANY
Schedule of Accounts Payable
May 31, 2011
$

Total accounts payable	$

rev: 10_17_2012

005_jchczk-ptzpkjc2.docx

Robert · Accepted Answer

Assume it is Monday, May 1, 2011, the first business day of the month, and you have just been hired as 
the accountant for Colo Company, which operates with monthly accounting periods. All of the company’s 
accounting work is completed through the end of April and its ledgers show April 30 balances. During 
your first month on the job, the company experiences the following transactions and events (terms for all 
its credit sales are 2/10, n/30 unless stated differently): 
      
May 1 
  
Issued Check No. 3410 to S&P Management Co. in payment of the May rent, $2,830. (Use two 
lines to record the transaction. Charge 70% of the rent to Rent Expense-Selling Space and the 
balance to Rent Expense-Office Space.) 
2   Sold merchandise on credit to Hensel Company, Invoice No. 8785, for $6,500 (cost is $4,500). 
2 
  
Issued a $200 credit memorandum to Knox Co., for defective (worthless) merchandise sold on 
April 28 and returned for credit. The total selling price (gross) was $4,800. 
3 
  
Received a $750 credit memorandum from Peyton Products for the return of merchandise 
purchased on April 29. 
4 
  
Purchased the following on credit from Gear Supply Co.: merchandise, $36,272; store supplies, 
$587; and office supplies, $76. Invoice dated May 4, terms n/10 EOM. 
5 
  
Received payment from Knox Co., for the balance from the April 28 sale less the May 2 return 
and the discount. 
8 
  
Issued Check No. 3411 to Peyton Products to pay for the $6,100 of merchandise purchased on 
April 29 less the May 3 return and a 2% discount. 
9   Sold store supplies to the merchant next door at their cost of $372 cash. 
10 
  
Purchased $4,400 of office equipment on credit from Gear Supply Co., invoice dated May 10, 
terms n/10 EOM. 
11   Received payment from Hensel Company for the May 2 sale less the discount. 
11   Purchased $9,400 of merchandise from Garcia, Inc., invoice dated May 10, terms 2/10, n/30. 
12 
  
Received an $900 credit memorandum from Gear Supply Co. for the return of defective office 
equipment received on May 10. 
15 
  
Issued Check No. 3412, payable to Payroll, in payment of sales salaries, $5,320, and office 
salaries, $4,550. Cashed the check and paid the employees. 
15 
  
Cash sales for the first half of the month are $60,120 (cost is $48,000). (Cash sales are recorded 
daily but are recorded only twice here to reduce repetitive entries.) 
15 
  
Post to the customer and creditor accounts. Also post individual items that are not included in 
column totals at the end of the month to the general ledger accounts. (Such items are posted 
daily but are posted only twice each month because they are few in number.) 
16   Sold merchandise on credit to Hensel Company, Invoice No. 8786, for $4,900 (cost is $2,800). 
17   Purchased $13,150 of merchandise from Fink Corp., invoice dated May 14, terms 2/10, n/60. 
19   Issued Check No. 3413 to Garcia, Inc., in payment of its May 10 invoice less the discount. 
22 
  
Sold merchandise to Lee Services, Invoice No. 8787, for $7,500 (cost is $5,640), terms 2/10, 
n/60. 
23   Issued Check No. 3414 to Fink Corp. in payment of its May 14 invoice less the discount. 
24 
  
Purchased the following on credit from Gear Supply Co.: merchandise, $9,020; store supplies, 
$690; and office supplies, $277. Invoice dated May 24, terms n/10 EOM. 
25 
  
Purchased $3,300 of merchandise from Peyton Products, invoice dated May 23, terms 2/10, 
n/30. 
26   Sold merchandise on credit to Crane Corp., Invoice No. 8788, for $14,600 (cost is $8,620). 
26   Issued Check No. 3415 to Perennial Power in payment of the May electric bill, $1,272. 
29 
  
The owner of Colo Company, Jenny Colo, used Check No. 3416 to withdraw $6,700 cash from 
the business for personal use. 
30   Received payment from Lee Services for the May 22 sale less the discount. 
30 
  
Issued Check No. 3417, payable to Payroll, in payment of sales salaries, $5,320, and office 
salaries, $4,550. Cashed the check and paid the employees. 
31   Cash sales for the last half of the month are $66,500 (cost is $42,350). 
31 
  
Post to the customer and creditor accounts. Also post individual items that are not included in 
column totals at the end of the month to the general ledger accounts. Foot and crossfoot the 
journals and make the month-end postings.
Following accounting adjustments are also available: 
    
a. Expired insurance, $546. 
b. Ending store supplies inventory, $2,646. 
c. Ending office supplies inventory, $507. 
d. Depreciation of store equipment, $564. 
e. Depreciation of office equipment, $322. 
    
Assume that Colo Co. uses the perpetual inventory system. Following opening balances are available for 
the month of May, 2011. 
    
   Balance 
  Cash $ 50,247   
  Accounts Receivable   4,800   
  Merchandise Inventory   221,780   
  Office Supplies   510   
  Store Supplies   2,467   
  Prepaid Insurance   3,508   
  Office Equipment   22,870   
  Accumulated Depreciation–Office Equipment   9,778   
  Store Equipment   39,120   
  Accumulated Depreciation–Store Equipment   16,606   
  Accounts Payable   6,100   
  Jenny Colo, Capital   312,818
Required: 
1.1 Enter these transactions in a sales journal. (Record the transactions in the given order. Omit the 
"$" sign in your response.) 
       
SALES JOURNAL 
Date Account Debited Invoice Number 
  
Accounts Receivable 
Dr. 
Sales Cr. 
Cost of Goods Sold Dr. 
Inventory Cr. 
  
May 2
  
Hensel Company
 
8785
 
    6500
 
    4500
 
  
  
May 16
  
Hensel Company
 
8786
 
    4900
 
    2800
 
  
  
May 22
  
Lee Services
 
8787
 
    7500
 
    5640
 
  
  
May 26
  
Crane Corp.
 
8788
 
    14600
 
    8620
 

  
May 31
   Totals       
33500
 
    21560
 
  
           
 
     
 

1.2 Enter these transactions in a purchases journal. (Record the transactions in the given order. 
Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your 
response.)
PURCHASES  JOURNAL 
Date Account Debited Date of Invoice Terms   
Accounts 
Payable 
Cr.   
Merchandis
e Inventory 
Dr.   
Office 
Supplies 
Dr.   
Other 
Accounts 
Dr. 
  Supplies (Gear Supply Co.)      36935
 
  36272
 
  76
 
  587    
May 4
 
 5/04
 
n/10, EOM
 
  
May 10
 
Office equipment (Gear Supply Co.)

5/10

n/10, EOM
 
  4400
 
  0
 
  4400
 
  0
May 11
 
Garcia, Inc.

5/10

2/10, n/30
 
  9400
 
  9400
 
  0
 
  0
May 17
 
Fink Corp.

5/14

2/10, n/60
 
  13150
 
  13150
 
  0
 
  0
May 24
 
Supplies (Gear Supply Co.)

5/24

n/10, EOM
 
  9987
 
  9020
 
  277
 
  690
May 25
 
Peyton Products

5/23

2/10, n/30
 
  3300
 
  3300
 
  0
 
  0
(Click to select)
 
Totals       77172
 
  71142
 
  4753
 
  1277    
           
 
   
 
   
 
   
 

1.3 Enter these transactions in a cash receipts journal. (Record the transactions in the given order. 
Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your 
response.)
CASH RECEIPTS JOURNAL 
Date Account Credited 
  Cash 
Dr. 
  
Sales 
Discount 
Dr.   
Accounts 
Receivable 
Cr.   
Sales 
Cr.   
Other  
Accts. 
Cr. 
Cost of Goods 
Sold Dr. 
Inventory Cr. 
  Knox, Inc.

Assume it is Monday, May 1, 2011, the first business day of the month, and you have just been hired as the accountant for Colo Company, which operates with monthly accounting periods. All of the...

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