On April 30, 2008, the balances of the accounts appearing in the ledger of Headwinds Company are as follows:
Cash |
$ 18,300 |
Sales Discounts |
$ 9,375 |
Accounts Receivable |
72,125 |
Purchases |
536,500 |
Merchandise Inventory, May 1, 2007 |
87,725 |
Purchases Returns and Allowances |
6,000 |
Office Supplies |
3,025 |
Purchases Discounts |
4,500 |
Prepaid Insurance |
4,500 |
Transportation In |
10,900 |
Land |
35,000 |
Sales Salaries Expense |
156,250 |
Store Equipment |
170,775 |
Advertising Expense |
55,000 |
Accumulated Depreciation— |
|
Delivery Expense |
9,000 |
Store Equipment |
55,900 |
Depreciation Expense— |
|
Office Equipment |
78,500 |
Store Equipment |
5,900 |
Accumulated Depreciation— |
|
Miscellaneous Selling Expense |
10,700 |
Office Equipment |
16,250 |
Office Salaries Expense |
100,000 |
Accounts Payable |
27,825 |
Rent Expense |
31,250 |
Salaries Payable |
2,950 |
Insurance Expense |
3,000 |
Unearned Rent |
8,300 |
Office Supplies Expense |
2,300 |
Notes Payable |
12,500 |
Depreciation Expense— |
|
Kasey Kurtz, Capital |
190,050 |
Office Equipment |
1,500 |
Kasey Kurtz, Drawing |
18,750 |
Miscellaneous Administrative Expense |
5,850 |
Sales |
1,106,450 |
Rent Revenue |
6,250 |
Sales Returns and Allowances |
10,000 |
Interest Expense |
750 |
Instructions
1. Does Headwinds Company use a periodic or perpetual inventory system? Explain.
2. Prepare a multiple step income statement for Headwinds Company for the year ended April 30, 2008. The merchandise inventory as of April 30, 2008, was $94,100.
3. Prepare the closing entries for Headwinds Company as of April 30, 2008.