During August,

The Board Shop, owned by Andrew John, 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. On August 1, 2017, the company had the following balances in its general ledger:

During August,

the last month of the fiscal year, the company had the following transactions:

Aug. 1 Paid $1,650 for August’s 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. Board Shop issued Spider a credit to their 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 Andrew John 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.

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.

Instructions

(a) Create a general ledger account for each of the above accounts and enter the August 1 balances.

(b) Record and post the August transactions. Update the balances in the general ledger accounts. (c) PrepareatrialbalanceatAugust31,2017.

(d) Record and post the adjustments required at August 31, 2017 and update the account balances as required.

(e) PrepareanadjustedtrialbalanceatAugust31,2017.

(f) Prepare a multiple-step income statement, statement of owner’s equity, and classified balance sheet.

(g) Record and post closing entries.

(h) Prepare a post-closing trial balance at August 31, 2017.

SOLUTION

(a), (b), (d), and (g)