Randiddle Co Is A Merchandising Business: Their Account Bala

Randiddle Co Is A Merchandising Business Their Account Balances As

Prepare all necessary journal entries for December transactions, update subsidiary ledgers and inventory control sheet, and prepare financial statements following the specified adjustments and closing procedures for Randiddle Co., a merchandising business using the perpetual inventory system, FIFO costing, and the allowance method for bad debts.

Paper For Above instruction

Randiddle Co., as a merchandising business, maintained detailed accounting records as of November 30, 2012, including a variety of asset, liability, equity, revenue, and expense accounts. During December, various transactions occurred that impacted these accounts, requiring careful journalization, posting, and financial statement preparation in accordance with generally accepted accounting principles (GAAP). This paper will detail the process of recording December transactions, adjusting entries, and preparing financial statements for the year ended December 31, 2012.

The initial step involves entering all opening balances from the trial balance into the respective ledger accounts, ensuring their accuracy before commencing the transaction analysis. Subsequently, each activity during December—such as sales, purchases, payments, returns, and other expenses—is to be recorded with appropriate journal entries. Sales transactions must be recorded through sales journals, considering discounts and returns, while purchases are documented via purchase journals, incorporating trade discounts, freight-in, and returns.

Attention must be paid to the specifics of each transaction. For example, sales of microwaves involve recognizing revenue at selling price, recording cost of goods sold using FIFO, and updating inventory accordingly. Purchases from suppliers should include freight charges, which are added to inventory under the perpetual system but are to be handled as instructed—excluding shipping costs from the inventory control sheet for simplicity. Return transactions require credit memos, with corresponding journal entries reflecting inventory and receivables adjustments.

The transportation charges paid are recorded separately, affecting cash and inventory accounts as appropriate, following FOB shipping point terms. Payments to vendors, including those with discounts, are to be properly journalized, applying discounts when applicable. The receipt of cash from customers, adjusting for returns and discounts, must be accurately reflected in cash receipts.

Data related to store supplies, equipment, and depreciation require adjusting entries at year-end. Depreciation expense will be computed using straight-line method over the equipment’s useful life, with no salvage value. Supplies on hand are to be adjusted to reflect the ending amount. Merchandise inventory is to be adjusted to physical count, and bad debt expense is calculated based on the net realizable value of receivables, applying the allowance method. The interest expense on the note payable is recognized for one month, applicable to December.

All adjusting entries should be journalized and posted, ensuring that the balances in accounts such as accrued salaries, prepaid expenses, and depreciation are correctly adjusted in the general ledger. After adjustments, the financial statements—multiple-step income statement, statement of owner’s equity, and classified balance sheet—must be prepared with proper classifications of current assets and liabilities. The net income reflects revenues minus expenses, and the owner’s equity is adjusted for net income and withdrawals.

The final step involves recording closing entries to transfer temporary account balances to the income summary and thereafter to the owner’s capital account, setting the temporary accounts to zero. A post-closing trial balance is then prepared to verify the correctness of ledger balances before closing the fiscal year.

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