Response to the following problem:
Designer Fads Company, a local retail clothing store, was established April 1, 2013. The company issued 8,500 shares of $10 par value common stock (30,000 shares authorizes); acquired inventory, supplies, and fixtures; borrowed $ 25,000 on a five year 10 percent note ( interest payable each March 31); secured a one-year property insurance policy; and rented its store space for one year. The accountant for Designer Fads the complied the following trial balance as of April 1, 2013:
Designer Fads Company
Trial Balance
April 1, 2013
Cash------ $ 48,000
Inventory----42,000
supplies ------2,800
Prepaid rent-13,200
fixtures -------71,000
Accounts payable-------------------------31,750
note payable-------------------------------25,000
common stock -----------------------------85,000
contributed capital in excess of par --38,250
Insurance exp-- 3000
------ -----------
$180,000 $180,000
During the next three months, the accountants assembled the following data concerning Designer Fad's activities during the quarter.
( Note: Whereas most data represent single transactions, some data have been accumulated).
Apr. 11 Paid salaries to salesclerks, $500.
Apr. 30 sold clothing totaling $27,000 ( $14,000 cash sales plus $13,000 on credit).
May 10 paid $20,000 of accounts payable balance
May 13 paid salaries to salesclerks $1800
May 20 purchased additional clothing on account from Shirts to Skirts, Inc $27,000 ( debit purchases account.)
May 21 collected $4800 of credit sales from customers.
May 25 returned goods to Shirts to Skirts Inc because of poor quality and received credit for the goods $1000.
May 31 sold merchandise totaling $30,000 ($13,000 cash sales plus $17,000 credit sales).
June 2 paid utility bills for April and May totaling $700
June 3 paid balance due shirts and skirts Inc.
June 10 purchased clothing on account from stitches co. $30,340
June 10 paid freight charges on clothing from stitches co. $200.
June 10 paid salaries to salesclerks $1900.
June 15 paid $8,840 toward amount owed Stitches Co.
June 18 issued 1,500 additional shares of common stock for $16 per share.
June 20 collected $13,300 on account from customers.
June 28 received a letter from a creditor requesting payment for $6,000 balance due since Apr 1, 2013.
June 28 paid balance due Stitches Co.
June 30 sold merchandise totaling $38,000 ( $25,000 cash sales plus $13,000 credit sales).
June 30 declared a quarterly dividend of $.50 per share on stock outstanding on June 30, 2013.
Additional data gathered that are pertinent to adjusting entries for the quarter are:
a. Accrued salaries for salesclerks $1,300.
b. Depreciation on fixtures $2,500.
c. Uncollected accounts are estimated to be 3 percent of credit sales.
d. $1,800 of the cash sales recorded on June 30 were gift certificated redeemable between July 1 and August 15, 2013.
e. utility bills for services during June $300
f. Supplies on hand June 30, 2013, $740
g. Income tax rate is 40 percent.
Note: Inventory on hand June 30, 2013, totaled $45,000
Required: On the basis of the data for Designer Fads Company:
a. Prepare entries in general journal form to record the transactions for the quarter ended June 30, 2013.
b. Set up T-accounts, and post the entries to the T-accounts. Indicate that an account has been posted by placing a check mark in the reference, or folio, column of the journal.
c. Prepare a trial balance, and enter it on a 10-column worksheet with columns for a trial balance, adjustments, and adjusted trial balance, an income statement, and a balance sheet.
d. complete the worksheet.
e. Prepare a quarterly income statement, a statement of retained earnings, and a balance sheet.
f. Journalize and post the adjusting entries. In the ledger accounts ( T-accounts), indicate the adjusting entries with an A.
g. Journalize and post the closing entries. In the ledger accounts ( T-accounts), indicate the closing entries with a C.
h. prepare a postclosing trial balance.