(If the Working Papers that accompany this book are not available, omit this compreh...

(If the Working Papers that accompany this book are not available, omit this comprehensive problem.)

Assume it is Monday, May 1, the first business day of the month, and you have just been hired as the

accountant for Eureka Company, which operates with monthly accounting periods. All of the company’s

accounting work is completed through the end of April and its ledgers show April 30 balances. During

your first month on the job, the company experiences the following transactions and events (terms for

all its credit sales are 2/10, n/30 unless stated differently):

May 1 Issued Check No. 3410 to J&K Management Co. in payment of the May rent, $3,710. (Use

two lines to record the transaction. Charge 80% of the rent to Rent Expense—Selling Space

and the balance to Rent Expense—Office Space.)

2 Sold merchandise on credit to Bowman Company, Invoice No. 8785, for $6,100 (cost is $4,100).

2 Issued a $175 credit memorandum to Knott Co., for defective (worthless) merchandise sold

on April 28 and returned for credit. The total selling price (gross) was $4,725.

3 Received a $798 credit memorandum from Parker Products for the return of merchandise purchased

on April 29.

4 Purchased the following on credit from Gates Supply Co.: merchandise, $37,072; store supplies,

$574; and office supplies, $83. Invoice dated May 4, terms n/10 EOM.

5 Received payment from Knott Co., for the balance from the April 28 sale less the May 2 return

and the discount.

8 Issued Check No. 3411 to Parker Products to pay for the $7,098 of merchandise purchased on

April 29 less the May 3 return and a 2% discount.

9 Sold store supplies to the merchant next door at their cost of $350 cash.

10 Purchased $4,074 of office equipment on credit from Gates Supply Co., invoice dated May 10,

terms n/10 EOM.

11 Received payment from Bowman Company for the May 2 sale less the discount.

11 Purchased $8,800 of merchandise from Gatsby, Inc., invoice dated May 10, terms 2/10, n/30.

12 Received an $854 credit memorandum from Gates Supply Co. for the return of defective office

equipment received on May 10.

15 Issued Check No. 3412, payable to Payroll, in payment of sales salaries, $5,470, and office

salaries, $3,000. Cashed the check and paid the employees.

15 Cash sales for the first half of the month are $55,220 (cost is $33,200). (Cash sales are recorded

daily but are recorded only twice here to reduce repetitive entries.)

15 Post to the customer and creditor accounts. Also post individual items that are not included in

column totals at the end of the month to the general ledger accounts. (Such items are posted

daily but are posted only twice each month because they are few in number.)

16 Sold merchandise on credit to Bowman Company, Invoice No. 8786, for $3,990 (cost is $1,890).

17 Purchased $13,650 of merchandise from Joey Corp., invoice dated May 14, terms 2/10, n/60.

19 Issued Check No. 3413 to Gatsby, Inc., in payment of its May 10 invoice less the discount.

22 Sold merchandise to Karim Services, Invoice No. 8787, for $6,850 (cost is $4,990), terms 2/10,

n/60.

23 Issued Check No. 3414 to Joey Corp. in payment of its May 14 invoice less the discount.

24 Purchased the following on credit from Gates Supply Co.: merchandise, $8,120; store supplies,

$630; and office supplies, $280. Invoice dated May 24, terms n/10 EOM.

25 Purchased $3,080 of merchandise from Parker Products, invoice dated May 23, terms 2/10,

n/30.

26 Sold merchandise on credit to Dexter Corp., Invoice No. 8788, for $14,210 (cost is $8,230).

26 Issued Check No. 3415 to Trinity Power in payment of the May electric bill, $1,283.

29 The owner of Eureka Company, Emlyn Eureka, used Check No. 3416 to withdraw $2,000 cash

from the business for personal use.

30 Received payment from Karim Services for the May 22 sale less the discount.

30 Issued Check No. 3417, payable to Payroll, in payment of sales salaries, $5,320, and office

salaries, $3,150. Cashed the check and paid the employees.

31 Cash sales for the last half of the month are $70,052 (cost is $45,500).

31 Post to the customer and creditor accounts. Also post individual items that are not included in

column totals at the end of the month to the general ledger accounts. Foot and crossfoot the

journals and make the month-end postings.

Required

1. Enter these transactions in a sales journal, a purchases journal, a cash receipts journal, a cash disbursements

journal, or a general journal as illustrated in this chapter (number all journal pages as

page 2). Post when instructed to do so. Assume a perpetual inventory system.

2. Prepare a trial balance in the Trial Balance columns of the work sheet form provided with the working

papers. Complete the work sheet using the following information for accounting adjustments.

a. Expired insurance, $403.

b. Ending store supplies inventory, $2,232.

c. Ending office supplies inventory, $504.

d. Depreciation of store equipment, $567.

e. Depreciation of office equipment, $329.

Prepare and post adjusting and closing entries.

3. Prepare a May 2010 multiple-step income statement, a May 2010 statement of owner’s equity, and

a May 31, 2010, classified balance sheet.

4. Prepare a post-closing trial balance. Also prove the accuracy of subsidiary ledgers by preparing schedules

of both accounts receivable and accounts payable.