Chapter 5, Problem 5.46PS

Journalizing purchase and sale transactions, making closing entries, preparing financial statements, and computing the gross profit percentage

Crystal Clear Cleaning has decided that, in addition to providing cleaning services, it will sell cleaning products. Crystal Clear uses the perpetual inventory system. During December 2017, Crystal Clear completed the following transactions:

Dec. 2	Purchased 475 units of inventory for $2,850 on account from Sparkle, Co. on terms, 3/10, n/20.
5	Purchased 600 units of inventory from Borax on account with terms 2/10, n/30. The total invoice was for $4,500, which included a $150 freight charge.
7	Returned 75 units of inventory to Sparkle from the December 2 purchase (cost $450).
9	Paid Borax.
11	Sold 285 units of goods to Happy Maids for $3,990 on account with terms 3/10, n/30. Crysta l Clear's cost of the goods was $1,710.
12	Paid Sparkle.
15	Received 22 units with a retail price of $308 of goods back from customer Happy Maids. The goods cost Crystal Clear $132.
21	Received payment from Happy Maids, settling the amount due in full.
28	Sold 265 un its of goods to Bridget. Inc. for cash of $3,975 (cost $1,691 ).
29	Paid cash for utilities of $415.
30	Paid cash for Sales Commission Expense of $550.
31	Recorded the following adjusting entries:
	a. Physical count of inventory on December 31 showed 428 units of goods on hand, $3,148
	b. Depreciation , $270
	c. Accrued salaries expense of $725
	d. Prepared all other adjustments necessary for December (Hint You will need to review the adjustment information in Chapter 3 to determine the remaining adjustments). Assume the cleaning supplies left at December 31 are $30.

Requirements

1. Open the following T-accounts in the ledger: Cash, $138, 150; Accounts Receivable, $2,600; Merchandise Inventory, $0; Cleaning Supplies, $30; Prepaid Rent, $1,500; Prepaid Insurance, $1,650; Equipment, $3,200; Truck, $7,000; Accumulated Depreciation—Equipment and Truck, $270; Accounts Payable, $1,470; Unearned Revenue, $11,500; Salaries Payable, $0; Interest Payable, $240; Notes Payable (Long-term), $96,000; Common Stock, $42,000; Retained Earnings, $2,650; Dividends, $0; Income Summary, $0; Service Revenue, $0; Sales Revenue, $0; Sales Returns and Allowances, $0; Sales Discounts, $0; Cost of Goods Sold, $0; Sales Commission Expense, $0; Utilities Expense, $0; Depreciation Expense, $0; Salaries Expense, $0; Insurance Expense, $0; Rent Expense, $0; Interest Expense, $0.

2. Journalize and post the December transactions. Compute each account balance, and denote the balance as Bal. Identify each accounts payable and accounts receivable with the vendor or customer name.

3. Journalize and post the adjusting entries. Denote each adjusting amount as Adj. Compute each account balance, and denote the balance as Bal. After posting all adjusting entries, prove the equality of debits and credits in the ledger.

4. Prepare the December multi-step income statement, statement of retained earnings, and classified balance sheet for the company. List Service Revenue under gross profit, and ignore classifying the expenses as selling and administrative.

5. Journalize the December dosing entries for the company.

6. Compute the gross profit percentage for the company.