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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Using the spreadsheet provided below, prepare the adjusting entries for merchandise inventory.

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To determine

Prepare the adjusting entries for merchandise inventory.

Explanation

Periodic inventory system:

The method or system of recording the transactions related to inventory occasionally or periodically are referred to as periodic inventory system.

Adjustment entries:

Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

  • Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
  • Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Record the adjusting entry:

DateAccount Titles and ExplanationDebit ($)Credit ($)
  Income Summary 50,000 
      Merchandise inventory 

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