COMPLETING A MERCHANDISER'S ACCOUNTING CYCLE
The end-of-month trial balance of Lake Placid Building Materials, Inc., at January 31 of the current year follows:
LAKE PLACID BUILDING MATERIALS, INC.
TRIAL BALANCE
JANUARY 31, 20XX
Balance
Account
#
Account Debit Credit
Cash 6,430.00
Accounts receivable 19,090.00
Inventory 65,400.00
Supplies 2,700.00
Building 188,170.00
Accumulated depreciation-building 36,000.00
Fixtures 45,600.00
Accumulated depreciation-fixtures 5,800.00
Accounts payable 28,300.00
Salary payable
Interest payable
Unearned sales revenue 6,560.00
Note payable, long-tem 87,000.00
Common stock 20,000.00
Retained earnings 124,980.00
Dividends 9,200.00
Sales revenue 177,970.00
Sales discounts 7,300.00
Sales returns and allowances 8,140.00
Cost of goods sold 103,000.00
Selling expense 21,520.00
General expense 10,060.00
Interest expense
Total 486,610.00 486,610.00
Additional data at January 31, 20XX:
a. Supplies consumed during the month, $1,500. Half is selling expense, and the other half is general expense.
b. Depreciation for the month: building, $4,000; fixtures, $4,800. One-fourth of depreciation is selling expense, and three-fourths is general expense.
c. Unearned sales revenue still unearned, $1,200.
d. Accrued salaries, a general expense, $1,150.
e. Accrued interest expense, $780.
f. Inventory on hand, $63,720.
Required:
1. Using four-column accounts, open the accounts listed on the trial balance, inserting their . unadjusted balances. Date the balances of the following accounts January 1: Supplies; Building; Accumulated Depreciation-Building; Fixtures; Accumulated DepreciationFixtures; Unearned Sales Revenue; and Retained Earnings. Date the balance of Dividends, January 31.
2. Prepare the adjusted trial balance for the month ended January 31 of the current year. Lake Placid groups all operating expense under two accounts, Selling Expense and General Expense. Leave two blank lines under Selling Expense and three blank lines under General Expense.
3. Journalize the adjusting entries at January 31.
4. Post the adjusting entries.
5. Prepare the company's multiple-step income statement and statement of retained earnings for the month ended January 31 of the current year. Also prepare the classified balance sheet.
6. Journalize the closing entries at January 31.
7. Post the closing entries.
8. ComputeLake Placid's current ratio and debt ratio at January 31, and compare these values with the industry averages of 1.9 for the current ratio and 0.57 for the debt ratio. Compute the gross margin percentage and the rate of inventory turnover for the month (the inventory balance at the end of December was $67,100), and compare these ratio values with the industry average of 0.26 for the gross margin ratio and 1.0 for inventory turnover. Does Lake Placid Building Materials appear to be stronger or weaker than the average company in the building materials industry?