accounting cycle project 381019

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.