Prepare a multiple-step income statement, statement of owners equity, and classified balance sheet. The owner...
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Accounting
Prepare a multiple-step income statement, statement of owners equity, and classified balance sheet. The owner made no capital contributions in the year.
The Bloons Shop, owned by Terry Smith, sells skateboards in the summer and snowboards in the winter. The shop has an August 31 fiscal year end, and uses a perpetual inventory system and the earnings approach. On August 1, 2024, the company had the following balances in its general ledger:
Cash
$21385
T. Smith, drawings
$52800
Merchandise inventory
64125
Sales
485500
Supplies
3750
Rent revenue
1200
Equipment
70800
Sales returns and allowances
11420
Acc. depreciation - equipment
13275
Cost of goods sold
301010
Acc. Payable
12650
Salaries expense
68200
Unearned revenue
4680
Rent expense
18150
Notes payable
42000
Insurance expense
4140
T. Smith, capital
58400
Interest expense
1925
During August, the last month of the fiscal year, the company had the following transactions:
Aug. 1 Paid $1,650 for Augusts rent. 2 Paid $6,500 of the amount included in Accounts Payable. 4 Sold merchandise costing $7,900 for $12,260 cash. 5 Purchased merchandise on account from Orange Line Co., n/30, FOB shipping point, for $24,500. 5 Paid freight charges of $500 on merchandise purchased from Orange Line Co. 8 Purchased supplies on account for $345. 9 Refunded a customer $425 cash for returned merchandise. The merchandise had cost $265 and was returned to inventory. 10 Sold merchandise on account to Spider Company for $15,750, terms 2/10, n/30, FOB shipping point. The merchandise had a cost of $9,765. 11 Paid Orange Line Co. for half of the merchandise purchased on August 5. 12 Spider Company returned $750 of the merchandise it purchased. Hammer Shop issued Spider a credit to its account. The merchandise had a cost of $465 and was returned to inventory. 15 Paid salaries, $3,100. 19 Spider Company paid the amount owing. 21 Purchased $9,900 of merchandise from Rainbow Option Co. on account, terms 2/10, n/30, FOB destination. 23 Returned $800 of the merchandise to Rainbow Option Co. and received a credit on the account. 24 Received $525 cash in advance from customers for merchandise to be delivered in September. 30 Paid salaries, $3,100. 30 Paid Rainbow Option Co. the amount owing. 31 Terry Smith withdrew $4,800 cash.
Adjustment and additional data: 1. A count of supplies on August 31 shows $755 on hand. 2. The equipment has an estimated eight-year useful life. Remember that adjusting entries are done annually, not monthly. 3. Of the notes payable, $6,000 must be paid on September 1 each year. 4. An analysis of the Unearned Revenue account shows that $3,750 has been earned by August 31. A corresponding entry of $2,325 for Cost of Goods Sold will also need to be recorded for these sales. 5. Interest accrued on the note payable to August 31 was $175. 6. A count of the merchandise inventory on August 31 shows $76,560 of inventory on hand.
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