PR 6-10B Periodic inventory accounts, multiple-step income statement, closing entries
On April 30, 2012, the balances of the accounts appearing in the ledger of Heritage Company are as follows:
| Cash | $ 60,000 | Sales Discounts | $ 35,000 |
| Accounts Receivable | 150,000 | Purchases | 1,770,000 |
| Merchandise Inventory, May 1, 2011 | 290,000 | Purchases Returns and Allowances | 12,000 |
| Office Supplies | 7,000 | Purchases Discounts | 8,000 |
| Prepaid Insurance | 18,000 | Freight In | 25,000 |
| Land | 70,000 | Sales Salaries Expense | 450,000 |
| Store Equipment | 400,000 | Advertising Expense | 200,000 |
| Accumulated Depreciation— | Delivery Expense | 18,000 | |
| Store Equipment | 190,000 | Depreciation Expense— | |
| Office Equipment | 250,000 | Store Equipment | 12,000 |
| Accumulated Depreciation— | Miscellaneous Selling Expense | 28,000 | |
| Office Equipment | 110,000 | Office Salaries Expense | 200,000 |
| Accounts Payable | 85,000 | Rent Expense | 45,000 |
| Salaries Payable | 9,000 | Insurance Expense | 6,000 |
| Unearned Rent | 6,000 | Office Supplies Expense | 5,000 |
| Notes Payable | 50,000 | Depreciation Expense— | |
| Mary Diaz, Capital | 525,000 | Office Equipment | 3,000 |
| Mary Diaz, Drawing | 100,000 | Miscellaneous Administrative Expense | 13,000 |
| Sales | 3,175,000 | Rent Revenue | 27,000 |
| Sales Returns and Allowances | 40,000 | Interest Expense | 2,000 |
Instructions
1. Does Heritage Company use a periodic or perpetual inventory system? Explain.
2. Prepare a multiple-step income statement for Heritage Company for the year ended April 30, 2012. The merchandise inventory as of April 30, 2012, was $315,000.
3. Prepare the closing entries for Heritage Company as of April 30, 2012.
4. What would be the net income if the perpetual inventory system had been used?
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