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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Appendix

Periodic inventory accounts, multiple-step income statement, closing entries

On December 31, 2016, the balances of the accounts appearing in the ledger of Wyman Company are as follows:

Chapter 6, Problem 6.10APR, Appendix Periodic inventory accounts, multiple-step income statement, closing entries On December

Instructions

1. Does Wyman Company u se a periodic or perpetual inventory system? Explain.

2. Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 2016. The merchandise inventory as of December 31, 2016, was $305,000.

3. Prepare the closing entries for Wyman Company as of December 31, 2016.

4. What would be the net income if the perpetual inventory system had been used?

(1)

To determine

Multi step income statement: A multiple step income statement refers to the income statement that shows the operating, and non-operating activities of the business, under separate head. In different steps of the multi-step income statement, principal operating activities are reported that starts from the record of sales revenue with all contra sales revenue account like sales returns, allowances and sales discounts.

To Explain: Whether Company W use a periodic inventory system or perpetual inventory system.

Explanation

Periodic Inventory System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year...

(2)

To determine

To Prepare: The income statement of Company W for the year ended December 31, 2016.

3.

To determine

Closing entries: These refers to the journal entries that are recorded at the end of an each accounting period. It closes all revenue accounts earned, and all expenses account incurred during the current accounting year to the company’s capital account.

To Record: The closing entries of Company W.

4.

To determine

To Mention: The net income of W Company under the perpetual inventory system.

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