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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

A portion of the work sheet of Habib Company for the year ended December 31 follows.

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Required

  1. 1. Determine the entries that appeared in the Adjustments columns and present them in general journal form on page 41.
  2. 2. Determine the net income for the year.
  3. 3. What is the amount of the ending capital?

1.

To determine

Record the adjustments columns in general journal.

Explanation

General journal is a record of financial transaction. The transactions are recorded in the journal prior to posting them to the accounts in the general ledger.

Journalize the entries in general journal.

Table (1)

Description:

Adjusting entries for inventory

  • Income summary is a temporary account and it is debited in case of net profit. Therefore, debit the income summary. Merchandise Inventory is an asset (current) account and it is decreased. Therefore, credit the merchandise inventory.
  • Merchandise Inventory is an asset (current) account and it is increased. Therefore, debit the merchandise inventory. Income summary is a temporary account and it is closed. Therefore, credit the income summary.

Adjusting entries for depreciation

  • Depreciation expense (Expense) is a component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the depreciation expense by $4,360.
  • Accumulated depreciation is a contra asset and it decreases the value of the assets...

2.

To determine

Calculate the net income for the year.

3.

To determine

Calculate the ending capital amount.

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