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CP6-2 Ocean Atlantic Co. is a merchandising business

Price: $12.99


Check figures: Net income: $710,760

Ocean Atlantic Co. is a merchandising business. The account balances for Ocean Atlantic
Co. as of July 1, 2012 (unless otherwise indicated), are as follows:

110 Cash $ 63,600
112 Accounts Receivable 153,900
115 Merchandise Inventory 602,400
116 Prepaid Insurance 16,800
117 Store Supplies 11,400
123 Store Equipment 469,500
124 Accumulated Depreciation—Store Equipment 56,700
210 Accounts Payable 96,600
211 Salaries Payable —
310 Kevin Gilmour, Capital, August 1, 2011 555,300
311 Kevin Gilmour, Drawing 135,000
312 Income Summary —
410 Sales 3,221,100
411 Sales Returns and Allowances 92,700
412 Sales Discounts 59,400
510 Cost of Merchandise Sold 1,623,000
520 Sales Salaries Expense 334,800
521 Advertising Expense 81,000
522 Depreciation Expense —
523 Store Supplies Expense —
529 Miscellaneous Selling Expense 12,600
530 Offi ce Salaries Expense 182,100
531 Rent Expense 83,700
532 Insurance Expense

During July, the last month of the fiscal year, the following transactions were completed:
July 1. Paid rent for July, $4,000.
3. Purchased merchandise on account from Lingard Co., terms 2/10, n/30, FOB
shipping point, $25,000.
4. Paid freight on purchase of July 3, $1,000.
6. Sold merchandise on account to Holt Co., terms 2/10, n/30, FOB shipping
point, $40,000. The cost of the merchandise sold was $24,000.
7. Received $18,000 cash from Flatt Co. on account, no discount.
10. Sold merchandise for cash, $90,000. The cost of the merchandise sold was
$50,000.

and so on ....

Instructions

1. Enter the balances of each of the accounts in the appropriate balance column of a
four-column account. Write Balance in the item section, and place a check mark (��)
in the Posting Reference column. Journalize the transactions for July starting on Page 20
of the journal.
2. Post the journal to the general ledger, extending the month-end balances to the
appropriate balance columns after all posting is completed. In this problem, you
are not required to update or post to the accounts receivable and accounts payable
subsidiary ledgers.
3. Prepare an unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use
these data to complete (5) and (6).
a. Merchandise inventory on July 31 $565,000
b. Insurance expired during the year 13,400
c. Store supplies on hand on July 31 3,900
d. Depreciation for the current year 11,500
e. Accrued salaries on July 31:
Sales salaries $3,200
Offi ce salaries 1,300 4,500
5. Optional: Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet
(work sheet), and complete the spreadsheet.
6. Journalize and post the adjusting entries. Record the adjusting entries on Page 22 of
the journal.
7. Prepare an adjusted trial balance.
8. Prepare an income statement, a statement of owner’s equity, and a balance sheet.
9. Prepare and post the closing entries. Record the closing entries on Page 23 of the
journal. Indicate closed accounts by inserting a line in both the Balance columns
opposite the closing entry. Insert the new balance in the owner’s capital account.
10. Prepare a post-closing trial balance.

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