Randiddle Co Is A Merchandising Business Their Accoun 498226

Randiddle Co Is A Merchandising Business Their Account Balances As

Randiddle Co. is a merchandising business. Their account balances as of November 30, 2012, are provided, including cash, accounts receivable, inventory, prepaid insurance, store supplies, store equipment, depreciation, accounts payable, salaries payable, interest payable, notes payable, capital, withdrawals, income summary, sales, various expenses, and cost of goods sold. The company uses the perpetual inventory system, employs the LIFO method for inventory costing, and uses the allowance method for bad debts. Transactions for December, the last month of the accounting year, include sales, purchases, payments, returns, transportation charges, expenses, and adjustments. The detailed transactions include sales of microwaves in various quantities and wattages, payments on accounts, purchases with discounts, returns, shipping, and expense payments.

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Introduction

Randiddle Co. operates as a merchandising business specializing in the sale of microwave ovens. For the fiscal year ending December 31, 2012, the company engaged in numerous transactions affecting its financial standing, inventory, receivables, payables, and overall profitability. Applying proper accounting procedures under the perpetual inventory system and LIFO valuation, the business aims to accurately record and report its financial position, reconciling accounts, and preparing essential financial statements at year-end. This paper discusses the detailed accounting procedures undertaken, from transaction recording to financial statement preparation, demonstrating comprehensive application of GAAP principles.

Accounting Procedures and Record Keeping

At the core of Randiddle Co.'s accounting process is the meticulous transaction recording, which involves journalizing sales, purchases, payments, returns, and expenses into their respective journals—sales journal, purchases journal, cash receipts journal, cash payments journal, and general journal. The used system ensures accuracy and ease of posting to subsidiary ledgers for accounts receivable and accounts payable, thus maintaining real-time tracking of individual customer and vendor balances.

Inventory Management and Costing Methods

The company's perpetual inventory system under LIFO (Last-In, First-Out) methodology necessitates the continuous updating of Inventory Control Sheets. Despite ignoring purchase discounts and transportation-in costs during computation to simplify calculations, comprehensive tracking of inventory movement aligns with proper inventory valuation and cost of goods sold calculations. Transactions such as purchases, sales, returns, and shipping, whether paid or on account, directly impact inventory levels and cost calculations under LIFO, where recent purchases are allocated to cost of goods sold first.

Transactions and Their Impact

December transactions include sales of microwaves in various wattages, with both cash and credit sales, and associated collections accounting for discounts and returns. Purchases involve acquiring microwaves from vendors like Matt Co., Prince Co., Joseph Co., and Elisha Co., with terms indicating discounts for early payments and FOB shipping points, affecting inventory valuation and payable accounts. Shipping costs are paid separately, increasing inventory costs, while returns and damaged goods, such as the microwaves returned from Marie Co., require credit memos and adjustments to receivables and inventory.

Expenses and Operating Activities

Expenses incurred during December include rent, salaries, advertising, store supplies, store equipment, and miscellaneous operational expenses. Salaries payable and accrued interest obligations are recognized, aligning with the accrual accounting principles. The purchase of store equipment and supplies are capitalized and expensed as appropriate. Expenses like store supplies and insurance are adjusted based on usage and expiration, while depreciation expense for store equipment is calculated via the straight-line method over its 10-year useful life, contributing to the accurate reflection of asset value depreciation over time.

Adjustments and Year-End Procedures

Adjusting entries are crucial for matching revenues and expenses within the period, including inventory valuation at year-end, accrued salaries and interest, depreciation, and bad debt allowance adjustments. These adjustments update the trial balance and facilitate accurate financial reporting. Bad debt expense is estimated based on the net realizable value of receivables, which is factored into the allowance for doubtful accounts to present a realistic valuation of receivables.

Financial Statement Preparation

The preparation of the unadjusted and adjusted trial balances sets the foundation for compiling the multiple-step income statement, reflecting gross profit, operating expenses, and net income. The statement of owner's equity details capital transactions, withdrawals, and net income, illustrating changes over the period. The classified balance sheet delineates current and non-current assets and liabilities, providing a comprehensive view of the financial position as of December 31, 2012.

Closing Entries and Finalization

Closing entries are journalized and posted to transfer temporary account balances to retained earnings through the income summary account, resetting revenue and expense accounts for the new period. The post-closing trial balance confirms the accuracy of permanent accounts after closing procedures. These steps ensure that the company's books are prepared for the upcoming fiscal period, maintaining integrity and accuracy in financial reporting.

Conclusion

In conclusion, Randiddle Co.'s December transactions reflect a comprehensive application of accounting principles within a merchandising context. Employing proper journalizing, posting, adjusting, and closing procedures ensures the accurate presentation of its financial position. The meticulous tracking and adjustment of inventory, receivables, payables, and expenses underscore adherence to GAAP standards, culminating in reliable financial statements and informed managerial decision-making.

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