Problem
Davis Uniform Corporation operates a store that sells uniforms. The following are the transactions that occurred during the first quarter of operations- Jan. 1 to Mar. 31, 2017.
Jan. 1 Davis issues 20,000 shares of $1 par value common stock with an issuing price of $10 per share.
Jan. 2 Purchased furniture and fixtures from Acme Furniture for $14,400 cash.
Jan. 4 Purchased $1,600 of office supplies for cash.
Jan. 15 Paid $36,000 in advance for one year's rent on the store building. The rent begins with
Jan 15. The company counts January for half a month.
Jan. 31 Paid salaries to employees for the first month, $3,600.
Feb. 1 Purchased $62,400 of uniforms inventory on account from the Birdwell Uniforms Manufacturing Company.
Feb. 1 Borrowed $66,000 from a local bank and signed two notes. The first note of $21,000 requires payment of principal in six months with annual interest rate at 4%.
The second note of $45,000 requires the payment of principal in two years and annual interest payment with annual interest rate at 5%.
Feb. 6 Sold uniforms on account to St. Jude's School for $7,200. Cost of the uniforms sold is $4,800.
Feb. 9 Paid Birdwell Uniforms Manufacturing Company $50,000 for the purchase on Feb. 1.
Feb. 20 Sold uniforms to a chemical factory for $79,200 cash. Cost of the uniforms sold is $47,520.
Feb. 23 Purchased $10,000 of uniforms inventory on account from the Birdwell Uniforms Manufacturing Company.
Feb. 28 Paid salaries to employees for the month of February, $4,200.
Mar. 1 Sold uniforms to the football team of Robert Lee High School, and accepted a $12,000, three-month, note receivable with annual interest rate at 5%. Cost of the uniforms sold is $9,600.
Mar. 1 Subleased a portion of the building to a jewelry store. Received $3,000 in advance for three months' rent beginning on Mar. 1.
Mar. 3 Some uniforms were returned by the chemical factory which made a purchase on Feb. 20. The selling price and cost of the returned uniforms is $7,200 and 4,320, respectively. Cash of $7,200 is refunded to the customer.
Mar. 23 Paid Birdwell Uniforms Manufacturing Company $14,400 for the purchases in Feb.
Mar. 25 Received $5,800 cash from St. Jude's School.
Mar. 30 The corporation announced and paid its shareholders cash dividends of $2,500.
Requirements:
1. Analyze the transactions and record journal entries in General Journal.
2. Open accounts in General Ledger and post from the General Journal to the general ledger accounts.
3. Record adjusting entries in General Journal and post to the general ledger accounts.
Additional information:
At the end of March, $1,000 of supplies remained.
The furniture and fixtures have a useful life of six years and will be worthless at the end of their useful life.
Salaries for the month of March are $4,800, and will be paid in April.
d. The company's management estimated that of the $1,400 remaining on account from St. Jude's School, $200 would be uncollectible.
e. Income tax rate applied to the company is 30%.
4. Prepare a worksheet as of Mar 31, 2017.
5. For Davis Uniform Corporation as of Mar 31, 2017, prepare the financial statements including Income Statement (multiple-step with EPS section), Classified Balance Sheet, Statement of Stockholders' Equity, (Statement of Cash Flows is not required).
6. Prepare closing entries to close the temporary accounts and post to the general ledger accounts.