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Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 5, Problem 5.10BPR
Appendix
Periodic inventory accounts, multiple-step income statement, closing entries
On June 30, 2018, the balances of the accounts appearing in the ledger of Simkins Company are as follows:
Cash $ 125,000 | Dividends $ 275,000 |
Sales 6,590,000 | |
Inventory, July 1, 2017 415,000 | Purchases 4,100,000 |
Estimated Returns Inventory, July 1,2017 25,000 | Purchases Returns and Allowances 32,000 |
Purchases Discounts 13,000 | |
Office Supplies 9,000 | Freight In 45,000 |
Prepaid Insurance 18,000 | Sales Salaries Expense 580,000 |
Land 300,000 | Advertising Expense 315,000 |
Store Equipment 550,000 | Delivery Expense 18,000 |
Depreciation Expense— Store Equipment 12,000 | |
Office Equipment 250,000 | Miscellaneous Selling Expense 28,000 |
Accumulated Depreciation— Office Equipment 110,000 | Office Salaries Expense 375,000 |
Rent Expense 43,000 | |
Accounts Payable 85,000 | Insurance Expense 17,000 |
Salaries Payable 30,000 | Office Supplies Expense 5,000 |
Customer Refunds Payable 9,000 | Depreciation Expense— Office Equipment 4,000 |
Unearned Rent 6,000 | |
Notes Payable 50,000 | Miscellaneous Administrative Expense 16,000 |
Common Stock 300,000 | Rent Revenue 32,500 |
Interest Expense 2,500 |
Instructions
- 1. Does Simkins Company use a periodic or perpetual inventory system? Explain.
- 2. Prepare a multiple-step income statement for Simkins Company for the year ended June 30, 2018. The inventory as of June 30, 2018, was $508,000. The estimated cost of customer returns inventory for June 30, 2018, is estimated to increase to $33,000.
- 3. Prepare the closing entries for Simkins Company as of June 30, 2018.
- 4. What would be the net income if the perpetual inventory system had been used?
Expert Solution & Answer
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Corporate Financial Accounting
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