Prepare a quarterly income statement

Assignment Help Financial Accounting

Reference no: EM13166730

Designer Fads Company, a local retail clothing store, was established April 1, 2014. 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, 2014:

Designer Fads Company
Trial Balance
April 1, 2013

Cash------ $ 57,000
Inventory---- 38,000
supplies ------ 4,100
Prepaid insurance---3,300
fixtures ------- 73,000
Accounts payable-------------------------29,850
note payable-------------------------------35,000
common stock -----------------------------87,000
contributed capital

in excess of par -----------------------------39,150
Rent exp----- 15,600
---------- -----------
$191,000 $191,000

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, $800.

Apr. 30 sold clothing totaling $29,000 ( $14,000 cash sales plus $15,000 on credit).

May 10 paid $20,000 of accounts payable balance

May 13 paid salaries to salesclerks $1,900

May 20 purchased additional clothing on account from Shirts to Skirts, Inc $31,000 ( 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 $2000.

May 31 sold merchandise totaling $32,000 ($15,000 cash sales plus $17,000 credit sales).

June 2 paid utility bills for April and May totaling $800

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 2100.

June 15 paid $8,840 toward amount owed Stitches Co.

June 18 issued 1,500 additional shares of common stock for $17 per share.

June 20 collected $13,300 on account from customers.

june 21 Received a letter from creditor requesting payment for $6,000 balance due since April 1, 2014.

June 28 paid balance due Stitches Co.

June 30 sold merchandise totaling $41,000 ( $25,000 cash sales plus $16,000 credit sales).

June 30 declared a quarterly dividend of $.50 per share on stock outstanding on June 30, 2014.

Additional data gathered that are pertinent to adjusting entries for the quarter are:

a. Accrued salaries for salesclerks $2,400.
b. Depreciation on fixtures $2,800.
c. Uncollected accounts are estimated to be 3 percent of credit sales.

d. $2,300 of the cash sales recorded on June 30 were gift certificated redeemable between July 1 and August 15, 2014.
e. utility bills for services during June $4500
f. Supplies on hand June 30, 2014, $880
g. Income tax rate is 40 percent.

Note: Inventory on hand June 30, 2013, totaled $40,000

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, 2014.

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.

Reference no: EM13166730

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