1. Franklin Craft Store completed the following merchandising transactions in the month of October. At
the beginning of October, Franklin’s ledger showed Cash of $8,000 and Franklin, Capital of $8,000.
Oct. 1 Purchased merchandise on account from Michael’s Wholesale Supply for$4,800, terms 1/10, n/30.
2 Sold merchandise on account for $3,900, terms 2/10, n/30. The cost of the merchandise sold was $2,400.
5 Received credit from Michael’s Wholesale Supply for merchandise returned $600.
9 Received collections in full, less discounts, from customers billed on sales of $3,900 on October 2.
10 Paid Michael’s Wholesale Supply in full, less discount.
11 Purchased supplies on account for $750.
12 Purchased merchandise for cash $2,100.
15 Received $200 refund for return of poor-quality merchandise from supplier on cash purchase.
17 Purchased merchandise on account from Handiwork Distributors for $2,500, terms 2/10, n/30.
19 Paid freight on October 17 purchase $310.
24 Sold merchandise for cash $6,900. The cost of the merchandise sold was $4,510.
25 Purchased merchandise on account from Hobbytown Inc. for $1,000, terms 3/10, n/30.
27 Paid Handiwork Distributors in full, less discount.
29 Made refunds to cash customers for returned merchandise $190. The returned merchandise had cost $134.
31 Sold merchandise on account for $1,460, terms 1/10, n/30. The cost of the merchandise sold was $950.
Franklin Craft’s chart of accounts includes Cash, Accounts Receivable, Merchandise Inventory, Supplies, Accounts
Payable, Franklin, Capital, Sales, Sales Returns and Allowances, Sales Discounts, and Cost of Goods Sold.
Instructions
(a) Journalize the transactions in a general journal using a perpetual inventory system.
2. The Welcome Inn opened for business on March 1, 2012. Here is its trial balance before adjustment
on March 31.
WELCOME INN
Trial Balance
March 31, 2012
Cash
Prepaid Insurance
Supplies
Land
Lodge
Furniture
Accounts Payable
Unearned Rent Revenue
Mortgage Payable
Owner’s Capital
Rent Revenue
Salaries Expense
Utilities Expense
Advertising Expense
Debit
$ 2,700
2,400
3,300
25,000
85,000
22,400
Credit
$
3,000
800
400
$145,000
9,200
2,800
50,000
72,000
11,000
$145,000
Other data:
1. Insurance expires at the rate of $400 per month.
2. An inventory of supplies shows $1,900 of unused supplies on March 31.
3. Annual depreciation is $4,440 on the lodge and $3,600 on furniture.
4. The mortgage interest rate is 9%. [($50,000 X 9%) X 1/12] =
5. Unearned rent of $1,300 has been earned.
6. Salaries of $960 are accrued and unpaid at March 31.
Instructions
(a) Journalize the adjusting entries on March 31. (A blank journal is available in Doc Sharing)
(b) Prepare a ledger using T accounts. Enter the trial balance amounts prior to adjustments and
post the
adjusting entries. You will need to include all 23 ledger accounts (see below).
(c) Prepare an adjusted trial balance on March 31.
(d) Prepare the closing entries for March 31.
Note: if you have Excel on your computer, you can type into the cells by double clicking on the
template.
CASH
Dr
PREPAID INSURANCE
Cr
LODGE
Dr
Cr
Cr
MORTGAGE PAYABLE
Dr
Cr
UTLITIES EXPENSE
Dr
Cr
SUPPLIES EXPENSE
Dr
Cr
ACCUM DEPRECIATION LODGE
ACCOUNTS PAYABLE
Dr
Dr
Cr
Dr
Cr
UNEARNED RENT REVENUE
Dr
Cr
OWNER'S CAPITAL
Dr
Cr
ADVERTISING EXPENSE
Dr
Cr
DEPRECIATION-LODGE
Dr
Cr
SUPPLIES
Dr
LAND
Cr
FURNITURE
Dr
Cr
SALARIES PAYABLE
Dr
Cr
RENT REVENUE
Dr
Cr
INTEREST EXPENSE
Dr
Cr
DEPRECIATION FURNITURE
Dr
Cr
Dr
Cr
ACCUM DEPRECIATION FURNITUR
Dr
Cr
INTEREST PAYABLE
Dr
Cr
SALARIES EXPENSE
Dr
Cr
INSURANCE EXPENSE
Dr
Cr