Concept explainers
The unadjusted
INSTRUCTIONS
- 1. Copy the unadjusted trial balance onto a worksheet and complete the worksheet using the following information:
a.–b.
Ending merchandise inventory, $98,700. c.
Uncollectible accounts expense, $1,000. d.
Store supplies on hand December 31, 2019, $625. e.
Office supplies on hand December 31, 2019, $305. f.
Depreciation on store equipment, $11,360.g.
Depreciation on office equipment, $3,300. h.
Accrued sales salaries, $4,000, and accrued office salaries, $1,000. i.
Social security tax on accrued salaries, $326; Medicare tax on accrued salaries, $76. (Assumes that tax rates have increased.) j.
Federal unemployment tax on accrued salaries, $56; state unemployment tax on accrued salaries, $270. - 2. Journalize the
adjusting entries on page 30 of the general journal. Omit descriptions. - 3. Journalize the closing entries on page 32 of the general journal. Omit descriptions.
- 4. Compute the following:
- a. net sales
- b. net delivered cost of purchases
- c. cost of goods sold
- d. net income or net loss
- e. balance of Ben Waites, Capital on December 31, 2019.
Analyze: What change(s) to Ben Waites, Capital will be reported on the statement of owner’s equity?
1.
Prepare the worksheet and complete the sections of Trial balance, adjustments and compute the changes to the BW Capital that will be shown in the statement of owner's equity.
Explanation of Solution
Worksheet: A worksheet is the used in the preparation of the financial statement. It is a pre-defined form, having multiple columns, used in the adjustment process.
Prepare the classified income statement:
Figure (1)
Figure (2)
Statement of owner's’ equity: This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity.
Prepare the Statement of owner's’ equity:
Company BJ | ||
Statement of Owner's Equity | ||
Year Ended December 31, 2019 | ||
Particulars | Amount ($) | Amount ($) |
BW Capital, January 1, 2019 | $166,310 | |
Net income for the year | $121,782.00 | |
Deduct - Withdrawals | $30,000.00 | |
Increase in Capital | $91,782.00 | |
BW Capital, December 31, 2019 | $258,092.00 |
Table (1)
The BW Capital increases by $91,782.
2.
Journalize the adjusting entries as on December 31, 2019.
Explanation of Solution
Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.
Pass the adjusting entry for the given transaction:
General Journal | Page - 30 | |||
Date | Description | Post Ref. | Debit | Credit |
2019 | ||||
December 31 | Income Summary | $105,900 | ||
Merchandise Inventory | $105,900 | |||
(To record the beginning inventory) | ||||
December 31 | Merchandise Inventory | $98,700 | ||
Income Summary | $98,700 | |||
(To record the closing inventory) | ||||
December 31 | Uncollectible Accounts Expense | $1,000 | ||
Allowance for Doubtful Accounts | $1,000 | |||
(To record the estimated loss on the net credit sale) | ||||
December 31 | Store Supplies Expense | $3,605 | ||
Store Supplies | $3,605 | |||
(To record the Supplies used) | ||||
December 31 | Office Supplies Expense | $2,645 | ||
Office Supplies | $2,645 | |||
(To record the Supplies used) | ||||
December 31 | Depreciation Expense - Store Equipment | $11,360 | ||
Accumulated Depreciation - Store Equipment | $11,360 | |||
(To record the depreciation on equipment) | ||||
December 31 | Depreciation Expense - Office Equipment | $3,300 | ||
Accumulated Depreciation - Office Equipment | $3,300 | |||
(To record the depreciation on equipment) |
Table (2)
3.
Journalize the closing entries as on December 31, 2019.
Explanation of Solution
Closing entries: The journal entries prepared to close the temporary accounts to Retained Earnings account are referred to as closing entries. The revenue, expense, and dividends accounts are referred to as temporary accounts because the information and figures in these accounts is held temporarily and consequently transferred to permanent account at the end of accounting year.
Pass the closing entries:
General Journal | Page - 32 | |||
Date | Description | Post Ref | Debit | Credit |
2019 | ||||
December 31 | Sales | $862,230 | ||
Purchases Returns and allowances | $4,240 | |||
Purchases Discounts | $10,770 | |||
Income Summary | $877,240 | |||
(To record the closing entry for the income) | ||||
December 31 | Income Summary | $121,782 | ||
BW Capital | $121,782 | |||
(To record the closing entry for the capital) | ||||
December 31 | BW Capital | $30,000 | ||
BW Drawings | $30,000 | |||
(To record the closing entry for the capital) |
Table (3)
General Journal | Page - 32 | |||
Date | Description | Post Ref | Debit | Credit |
2019 | ||||
December 31 | Income Summary | $748,258.00 | ||
Sales Returns and Allowances | $7,580 | |||
Purchases | $504,810 | |||
Freight In | $7,000 | |||
Salaries Expense - Sales | $79,950 | |||
Rent Expense | $35,500 | |||
Advertising Expense | $12,300 | |||
Store Supplies Expense | $3,605 | |||
Depreciation Expense - Store Equipment | $11,360 | |||
Salaries Expense - Office | $78,480 | |||
Uncollectible Accounts Expense | $1,000 | |||
Depreciation Expense - Office Equipment | $3,300 | |||
Office Supplies Expense | $2,645 | |||
Payroll Taxes Expense | $728 | |||
(To record the closing entry for the expenses) |
Table (4)
4.
Calculate the required ratios.
Explanation of Solution
a. Net Sales:
Compute the net sales:
Particulars | Amount ($) |
Sales | $862,230 |
Less: Sales Discount | 7,580 |
Net Sales | $854,650 |
Table (5)
b. Net delivered cost of purchases
Compute the Net delivered cost of purchases:
Particulars | Amount ($) | Amount ($) |
Purchases | $504,810 | |
Freight In | $7,000 | |
Delivered Cost of Purchases | $511,810 | |
Less: Purchases Returns and Allowances | $4,240 | |
Purchases Discount | $10,770 | $15,010 |
Net Delivered Cost of Purchases | $496,800 |
Table (6)
c. Cost of Goods Sold:
Compute the cost of goods sold:
Particulars | Amount ($) |
Merchandise Inventory, January 1, 2019 | $105,900 |
Net Delivered Cost of Purchases | $496,800 |
Total Merchandise Available for sale | $602,700 |
Less: Merchandise Inventory, closing | $98,700 |
Cost of Goods Sold | $504,000 |
Table (7)
d. Net Income:
The net income for the year is $121,782.
e. Balance of BW capital on December 31, 2019
Compute the Balance of BW capital on December 31, 2019:
Particulars | Amount ($) | Amount ($) |
BW Capital, January 1, 2019 | $166,310 | |
Net income for the year | $121,782 | |
Deduct - Withdrawals | $30,000 | |
Increase in Capital | $91,782 | |
BW Capital, December 31, 2019 | $258,092 |
Table (8)
Want to see more full solutions like this?
Chapter 12 Solutions
COLLEGE ACCOUNTING: CONTEMP APPROACH
- The balance in Ashwood Companys accounts payable account at December 31, 2019, was 1,200,000 before any necessary year-end adjustment relating to the following: Goods were in transit from a vendor to Ashwood on December 31, 2019. The invoice cost was 85,000, and the goods were shipped FOB shipping point on December 29, 2019. The goods were received on January 2, 2020. Goods shipped FOB shipping point on December 20, 2019, from a vendor to Ashwood were lost in transit. The invoice cost was 40,000. On January 5, 2020, Ashwood filed a 40,000 claim against the common carrier. Goods shipped FOB destination on December 22, 2019, from a vendor to Ashwood were received on January 6, 2020. The invoice cost was 20,000, What amount should Ashwood report as accounts payable on its December 31,2019, balance sheet? a. 1,260,000 b. 1,285,000 c. 1,325,000 d. 1,345,000arrow_forwardThe trial balance of Jillson Company as of December 31, the end of its current fiscal year, is as follows: Here are the data for the adjustments. ab. Merchandise Inventory at December 31, 54,845.00. c. Store supplies inventory (on hand), 488.50. d. Insurance expired, 680. e. Salaries accrued, 692. f. Depreciation of store equipment, 3,760. Required Complete the work sheet after entering the account names and balances onto the work sheet.arrow_forwardThe accounts and their balances in the ledger of Markeys Mountain Shop as of December 31, the end of its fiscal year, are as follows: Data for the adjustments are as follows. Assume that Markeys Mountain Shop uses the perpetual inventory system. a. Merchandise Inventory at December 31, 140,357. b. Store supplies inventory (on hand) at December 31, 540. c. Depreciation of building, 3,400. d. Depreciation of store equipment, 3,800. e. Salaries accrued at December 31, 1,250. f. Insurance expired during the year, 1,480. Required 1. Complete the work sheet after entering the account names and balances onto the work sheet. Ignore this step if using CLGL. 2. Journalize the adjusting entries. If using manual working papers, record adjusting entries on journal page 63.arrow_forward
- On June 30, 2019, the balances of the accounts appearing in the ledger of Simkins Company are as follows: Instructions 1. Does Simkins Company use a periodic or perpetual inventory system? Explain. 2. Prepare a multiple-step income statement for Simkins Company for the year ended June 30, 2019. The merchandise inventory as of June 30, 2019, was 508,000. The adjustment for estimated returns inventory for sales for the year ending December 31, 2019, was 33,000. 3. Prepare the closing entries for Simkins Company as of June 30, 2019. 4. What would the net income have been if the perpetual inventory system had been used?arrow_forwardEND-OF-PERIOD SPREADSHEET, ADJUSTING, CLOSING, AND REVERSING ENTRIES Vickis Fabric Store shows the trial balance on page 601 as of December 31, 20-1. At the end of the year, the following adjustments need to be made: (a, b)Merchandise inventory as of December 31, 31,600. (c, d, e)Vicki estimates that customers will be granted 2,500 in refunds of this years sales next year and the merchandise expected to be returned will have a cost of 1,800. (f)Unused supplies on hand, 350. (g)Insurance expired, 2,400. (h)Depreciation expense for the year on building, 20,000. (i)Depreciation expense for the year on equipment, 4,000. (j)Wages earned but not paid (Wages Payable), 520. (k)Unearned revenue on December 31, 20-1, 1,200. PROBLEM 15-10A CONT. REQUIRED 1. Prepare an end-of-period spreadsheet. 2. Prepare adjusting entries and post adjusting entries to an Income Summary T account. 3. Prepare closing entries and post to a Capital T account. There were no additional investments this year. 4. Prepare a post-closing trial balance. 5. Prepare reversing entry(ies).arrow_forwardJohn Neff owns and operates Waikiki Surf Shop. A year-end trial balance is provided on page 561. Year-end adjustment data for the Waikiki Surf Shop are shown below. Neff uses the periodic inventory system. Year-end adjustment data are as follows: (a, b)A physical count shows that merchandise inventory costing 51,800 is on hand as of December 31, 20--. (c, d, e)Neff estimates that customers will be granted 2,000 in refunds of this years sales next year and the merchandise expected to be returned will have a cost of 1,200. (f)Supplies remaining at the end of the year, 600. (g)Unexpired insurance on December 31, 2,600. (h)Depreciation expense on the building for 20--, 5,000. (i)Depreciation expense on the store equipment for 20--, 3,000. (j)Wages earned but not paid as of December 31, 1,800. (k)Neff also offers boat rentals which clients pay for in advance. Unearned boat rental revenue as of December 31 is 3,000. Required 1. Prepare a year-end spreadsheet. 2. Journalize the adjusting entries. 3. Compute cost of goods sold using the spreadsheet prepared for part (1).arrow_forward
- On December 31, the end of the year, the accountant for Fireside Magazine was called away suddenly because of an emergency. However, before leaving, the accountant jotted down a few notes pertaining to the adjustments. Journalize the necessary adjusting entries. Assume that Fireside Magazine uses the periodic inventory system. ab. A physical count of inventory revealed a balance of 199,830. The Merchandise Inventory account shows a balance of 202,839. c. Subscriptions received in advance amounting to 156,200 were recorded as Unearned Subscriptions. At year-end, 103,120 has been earned. d. Depreciation of equipment for the year is 12,300. e. The amount of expired insurance for the year is 1,612. f. The balance of Prepaid Rent is 2,400, representing four months rent. Three months rent has expired. g. Three days salaries will be unpaid at the end of the year; total weekly (five days) salaries are 4,000. h. As of December 31, the balance of the supplies account is 1,800. A physical inventory of the supplies was taken, with an amount of 920 determined to be on hand.arrow_forwardHere are the accounts in the ledger of Mishas Jewel Box, with the balances as of December 31, the end of its fiscal year. Here are the data for the adjustments. Assume that Mishas Jewel Box uses the perpetual inventory system. a. Merchandise Inventory at December 31, 124,630. b. Insurance expired during the year, 1,294. c. Depreciation of building, 3,300. d. Depreciation of store equipment, 6,470. e. Salaries accrued at December 31, 2,470. f. Store supplies inventory (on hand) at December 31, 1,959. Required 1. Complete the work sheet after entering the account names and balances onto the work sheet. Ignore this step if using CLGL. 2. Journalize the adjusting entries. If using manual working papers, record adjusting entries on journal page 63.arrow_forwardPost the following November transactions to T-accounts for Accounts Payable and Inventory, indicating the ending balance (assume no beginning balances in these accounts). A. purchased merchandise inventory on account, $22,000 B. paid vendors for part of inventory purchased earlier in month, $14,000 C. purchased merchandise inventory for cash, $6,500arrow_forward
- ADJUSTMENT FOR MERCHANDISE INVENTORY USING T ACCOUNTS: PERIODIC INVENTORY SYSTEM Sandra Owens owns a business called Sandras Sporting Goods. Her beginning inventory as of January 1, 20--, was 33,000, and her ending inventory as of December 31, 20--, was S36,000. Set up T accounts for Merchandise Inventory and Income Summary and perform the year-end adjustment for Merchandise Inventory.arrow_forwardPost the following November transactions to T-accounts for Accounts Payable, Inventory, and Cash, indicating the ending balance. Assume no beginning balances in Accounts Payable and Inventory, and a beginning Cash balance of $21,220. A. purchased merchandise inventory on account, $9,900 B. paid vendors for part of inventory purchased earlier in month, $6,500 C. purchased merchandise inventory for cash, $4,750arrow_forwardOn December 31, Marchant Company took a physical count of its merchandise inventory. It operates under the perpetual inventory system. The physical count amounted to 185,294. The Merchandise Inventory account shows a balance of 187,936. Journalize the adjusting entry.arrow_forward
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageCollege Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage Learning
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning