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Designer Fads Company, a local retail clothing store




Question;Designer Fads Company, a local retail clothing store, was established April 1, 2014. The company issued 8,500 shares of $10 par value common stock (30,000 shares authorizes), acquired inventory, supplies, and fixtures, borrowed $ 25,000 on a five year 10 percent note (interest payable each March 31), secured a one-year property insurance policy, and rented its store space for one year. The accountant for Designer Fads the complied the following trial balance as of April 1, 2014:Designer Fads CompanyTrial BalanceApril 1, 2013Cash------ $ 57,000Inventory---- 38,000supplies ------ 4,100Prepaid insurance---3,300fixtures ------- 73,000Accounts payable-------------------------29,850note payable-------------------------------35,000common stock -----------------------------87,000contributed capitalin excess of par -----------------------------39,150Rent exp----- 15,600---------- -----------$191,000 $191,000During the next three months, the accountants assembled the following data concerning Designer Fad's activities during the quarter.(Note: Whereas most data represent single transactions, some data have been accumulated).Apr. 11 Paid salaries to salesclerks, $800.Apr. 30 sold clothing totaling $29,000 ($14,000 cash sales plus $15,000 on credit).May 10 paid $20,000 of accounts payable balanceMay 13 paid salaries to salesclerks $1,900May 20 purchased additional clothing on account from Shirts to Skirts, Inc $31,000 (debit purchases account.)May 21 collected $4800 of credit sales from customers.May 25 returned goods to Shirts to Skirts Inc because of poor quality and received credit for the goods $2000.May 31 sold merchandise totaling $32,000 ($15,000 cash sales plus $17,000 credit sales).June 2 paid utility bills for April and May totaling $800June 3 paid balance due shirts and skirts Inc.June 10 purchased clothing on account from stitches co. $30,340June 10 paid freight charges on clothing from stitches co. $200.June 10 paid salaries to salesclerks 2100.June 15 paid $8,840 toward amount owed Stitches Co.June 18 issued 1,500 additional shares of common stock for $17 per share.June 20 collected $13,300 on account from customers.june 21 Received a letter from creditor requesting payment for $6,000 balance due since April 1, 2014.June 28 paid balance due Stitches Co.June 30 sold merchandise totaling $41,000 ($25,000 cash sales plus $16,000 credit sales).June 30 declared a quarterly dividend of $.50 per share on stock outstanding on June 30, 2014.Additional data gathered that are pertinent to adjusting entries for the quarter are:a. Accrued salaries for salesclerks $2,400.b. Depreciation on fixtures $2,800.c. Uncollected accounts are estimated to be 3 percent of credit sales.d. $2,300 of the cash sales recorded on June 30 were gift certificated redeemable between July 1 and August 15, 2014.e. utility bills for services during June $4500f. Supplies on hand June 30, 2014, $880g. Income tax rate is 40 percent.Note: Inventory on hand June 30, 2013, totaled $40,000Required:On the basis of the data for Designer Fads Company:a. Prepare entries in general journal form to record the transactions for the quarter ended June 30, 2014.b. Set up T-accounts, and post the entries to the T-accounts. Indicate that an account has been posted by placing a check mark in the reference, or folio, column of the journal.c. Prepare a trial balance, and enter it on a 10-column worksheet with columns for a trial balance, adjustments, and adjusted trial balance, an income statement, and a balance sheet.d. complete the worksheet.e. Prepare a quarterly income statement, a statement of retained earnings, and a balance sheet.f. Journalize and post the adjusting entries. In the ledger accounts (T-accounts), indicate the adjusting entries with an A.g. Journalize and post the closing entries. In the ledger accounts (T-accounts), indicate the closing entries with a C.h. prepare a postclosing trial balance


Paper#42870 | Written in 18-Jul-2015

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