Question

At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Land Common stock Retained earnings $ 6,900 15, eee 7. eee 15,800 13,989 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,200 on account from Ross Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $190 were paid in cash. 2. Returned $400 of the inventory it had purchased from Ross Company because the inventory was damaged in transit. The seller agreed to pay the return freight cost. 3. Paid the amount due on its account payable to Ross Company within the cash discount period. 4. Sold inventory that had cost $6,800 for $12,100 on account, under terms 2/10, 1/45. 5. Received merchandise returned from a customer. The merchandise originally cost $900 and was sold to the customer for $1.680 cash. The customer was paid $1,680 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $140 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Sold the land for $8.500. 9. Recognized accrued interest income of $600. 10. Took a physical count indicating that $13.400 of inventory was on hand at the end of the accounting period. (Hint: Determine the current balance in the inventory account before calculating the amount of the inventory write down.) Problem 4-26A Parte e. Use a single general journal to close all revenue, gain, and expense accounts to the retained earnings account. Post the journal entry to the ledger accounts created in Part c and prepare a post-closing trial balance. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.)

Answer 1

Journal entry

Date	General Journal	Debit	Credit
	Sales revenue a/c	$12100
	Gain on sale of land a/c {$8500-$7000}	$1500
	Interest revenue a/c	$600
	To Cost of goods sold a/c		$6400
	To sales discount a/c		$194
	To sales returns and allowances a/c		$1680
	To Delivery expense a/c		$330
	To Retained earnings a/c		$5596
	[Being to record to close all revenue,gain and expense to the retained earnings account ]

Redd Company

Post - Closing Trial Balance

December 31,Year 2

No.	Account tittles	Debit	Credit
	Cash	$20496
	Inventory	$13400
	Interest receivable	$600
	Common stock		$15000
	Retained earnings		$19496
	Totals	$34496	$34496

Working notes:

1) Cash

=Beginning balance- freight costs for purchase of inventory from Ross company - cash paid for accounts payable to Ross company- paid for merchandise- Inventory sale freight costs+Inventoryselling price at 2% discount+sale of land

=$6900-$190-$4752-$1680-$140+$11858+$8500

=$20496

2)Inventory

=Beginning balance+purchased inventory from Ross company+cost of returned merchandise-returned inventory-cost of selling inventory at 2% discount -sale of inventory

=$15000 +$5200 +$900 - $400 - $6800 - $500

=$13400

3) Retained earnings

=Beginning balance+Income summary

=$13900+$5596

=$19496

4) Delivery expense

=Freight costs for purchase from Ross company+freight costs for delivery of goods

=$190+$130

=$330

5)Sales discount

=sale of inventory at 2% discount -Purchase of inventory from Ross company at 1% discount

=[$12100*2%]-[($5200-$400)*1%]

=$ 242-$ 48

=$194

6)Cost of goods sold

=Cost of selling inventory at 2% discount+sale of inventory-returned merchandise

=$6800+$500-$900

=$6400

7)Income summary

=Sales revenue+Gain on sale of land+ Interest revenue-cost of goods sold-sales discount-sales returns and allowances- delivery expense

=$12100 + $1500 + $600 - $6400 - $194 - $1680 - $330

=$5596

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