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
April 1, 2013
Cash—— $ 48,000
common stock —————————–85,000
contributed capital in excess of par 38,250
Insurance exp 3000
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 $18000
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 $13,000 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.