Mini-Practice Set 2 Merchandising Business Accounting Cycle The Fashion Rack The Fashion Rack is a retail merchandising business that sells...

Mini-Practice Set 2Merchandising Business Accounting CycleThe Fashion Rack

The Fashion Rack is a retail merchandising business that sells brand-name clothing at discount prices. The firm is owned and managed by Teresa Lojay, who started the business on April 1, 2019. This project will give you an opportunity to put your knowledge of accounting into practice as you handle the accounting work of The Fashion Rack during the month of October 2019.

The Fashion Rack has a monthly accounting period. The firm's chart of accounts is shown below. The journals used to record transactions are the sales journal, purchases journal, cash receipts journal, cash payments journal, and general journal. Postings are made from the journals to the accounts receivable ledger, accounts payable ledger, and general ledger. The employees are paid at the end of the month. A computerized payroll service prepares all payroll records and checks.

1. Open the general ledger accounts and enter the balances for October 1, 2019. Obtain the necessary figures from the postclosing trial balance prepared on September 30, 2019, which is shown below. (If you are using the Study Guide & Working Papers, you will find that the general ledger accounts are already open.)
2. Open the subsidiary ledger accounts and enter the balances for October 1, 2019. Obtain the necessary figures from the schedule of accounts payable and schedule of accounts receivable prepared on September 30, 2019, which appears below. (If you are using the Study Guide & Working Papers, you will find that the subsidiary ledger accounts are already open.)
3. Analyze the transactions for October and record each transaction in the proper journal. (Use 10 as the number for the first page of each special journal and 16 as the number for the first page of the general journal.)
4. Post the individual entries that involve customer and creditor accounts from the journals to the subsidiary ledgers on a daily basis. Post the individual entries that appear in the general journal and in the Other Accounts sections of the cash receipts and cash payments journals to the general ledger on a daily basis.
5. Total, prove, and rule the special journals as of October 31, 2019.
6. Post the column totals from the special journals to the general ledger accounts.

The Fashion Rack

Chart of Accounts

Assets

Revenues

101

Cash

401

Sales

111

Accounts Receivable

402

Sales Returns and Allowances

112

Allowance for Doubtful Accounts

Cost of Goods Sold

121

Merchandise Inventory

501

Purchases

131

Supplies

502

Freight In

133

Prepaid Insurance

503

Purchases Returns and Allowances

135

Prepaid Advertising

504

Purchases Discounts

141

Equipment

Expenses

142

Accumulated Depreciation—Equipment

611

Advertising Expense

Liabilities

614

Depreciation Expense—Equipment

203

Accounts Payable

617

Insurance Expense

221

Social Security Tax Payable

620

Uncollectible Accounts Expense

222

Medicare Tax Payable

623

Janitorial Services Expense

223

Employee Income Tax Payable

626

Payroll Taxes Expense

225

Federal Unemployment Tax Payable

629

Rent Expense

227

State Unemployment Tax Payable

632

Salaries Expense

229

Salaries Payable

635

Supplies Expense

231

Sales Tax Payable

638

Telephone Expense

Owners Equity

644

Utilities Expense

301

Teresa Lojay, Capital

 302

Teresa Lojay, Drawing

 399

Income Summary

Page 500