Question

P5-6A The trial balance of People’s Choice Wholesale Company contained the following
accounts shown at December 31, the end of the company’s fiscal year.

PEOPLE’S CHOICE WHOLESALE COMPANY Trial Balance December 31, 2017
		Debit		Credit
Cash		$ 31,400
Accounts Receivable		37,600
Inventory		70,000
Land		92,000
Buildings		200,000
Accumulated Depreciation—Buildings				$ 60,000
Equipment		83,500
Accumulated Depreciation—Equipment				40,500
Notes Payable				54,700
Accounts Payable				17,500
Common Stock				160,000
Retained Earnings				67,200
Dividends		10,000
Sales Revenue				922,100
Sales Discounts		6,000
Cost of Goods Sold		709,900
Salaries and Wages Expense		51,300
Utilities Expense		11,400
Maintenance and Repairs Expense		8,900
Advertising Expense		5,200
Insurance Expense		4,800
		$1,322,000		$1,322,000

Adjustment data:
1. Depreciation is $8,000 on buildings and $7,000 on equipment. (Both are operating
expenses.)
2. Interest of $4,500 is due and unpaid on notes payable at December 31.
3. Income tax due and unpaid at December 31 is $24,000.
Other data: $15,000 of the notes payable are payable next year.

Instructions
(a) Journalize the adjusting entries.
(b) Create T-accounts for all accounts used in part (a). Enter the trial balance amounts
into the T-accounts and post the adjusting entries.
(c) Prepare an adjusted trial balance.
(d) Prepare a multiple-step income statement and a retained earnings statement for the
year, and a classified balance sheet at December 31, 2017.

Answer 1

Journal Entries
Date	Particulars	Debit($)	Credit($)
1	Depreciation Expenses	15000
	Accumulated Depreciation—Buildings		8000
	Accumulated Depreciation—Equipment		7000
	Both are operatingexpenses
2	Interest Expense	4500
	Notes Payable		4500
	unpaid on notes payable at December 31
3	Income tax Expenses	24000
	Income tax Payable		24000
	Income tax due and unpaid
3	Interest Expense	15000
	Notes Payable		15000
	notes payable are payable next year

Depreciation Expenses
Date	Debit($)	Credit($)	Balance($)
1	15000		15000

Accumulated Depreciation—Buildings
Date	Debit($)	Credit($)	Balance($)
opening Balance		60000	-60000
1		8000	-68000

Accumulated Depreciation—Equipment
Date	Debit($)	Credit($)	Balance($)
opening Balance		40500	-40500
1		7000	-47500

Interest Expense
Date	Debit($)	Credit($)	Balance($)
2	4500		4500
3	15000		19500

Notes Payable
Date	Debit($)	Credit($)	Balance($)
opening Balance		54700	-54700
2		4500	-59200
3		15000	-74200

Income tax Expenses
Date	Debit($)	Credit($)	Balance($)
3	24000		24000

Income tax Payable
Date	Debit($)	Credit($)	Balance($)
3		24000	-24000

Adjusted Trail Balance
Particulars	Debit($)	Credit($)
Cash	$31,400
Accounts Receivable	37,600
Inventory	70,000
Land	92,000
Buildings	200,000
Accumulated Depreciation—Buildings		$68,000
Equipment	83,500
Accumulated Depreciation—Equipment		47,500
Notes Payable		74,200
Accounts Payable		17,500
Common Stock		160,000
Retained Earnings		67,200
Income tax Payable		24,000
Dividends	10,000
Sales Revenue		922,100
Sales Discounts	6,000
Cost of Goods Sold	709,900
Salaries and Wages Expense	51,300
Utilities Expense	11,400
Maintenance and Repairs Expense	8,900
Advertising Expense	5,200
Insurance Expense	4,800
Depreciation Expenses	15,000
Interest Expense	19,500
Income tax Expenses	24,000
	$1,380,500	$1,380,500

Income Statement
Particulars	Amount($)	Amount($)
Revenues
Sales Revenue	922100
Less: Sales Discounts	-6000
Cost of Goods Sold	-709900
Gross Profit on Sale		206200
Less: Expenses
Salaries and Wages Expense	51,300
Utilities Expense	11,400
Maintenance and Repairs Expense	8,900
Advertising Expense	5,200
Insurance Expense	4,800
Depreciation Expenses	15,000
Interest Expense	19,500
Income tax Expenses	24,000
		140100
Net income		66100

Retained Earnings Statement
Particulars	Amount($)	Amount($)
Retained Earnings Jan 1, 20xx		67200
Net income	66100
Less: Dividends	10000
Retained Earnings		56100
Retained earnings Dec31, 20xx		123300

Stockholders Equity
Particulars	Amount($)	Amount($)
Common stock	160000
Retained Earnings	123300
Total Stockholders Equity	283300	0

Balance Sheet
Assets	Amount($)	Liabulities	Amount($)
Cash	31400	Notes Payable	74200
Accounts Receivable	37600	Accounts Payable	17500
Inventory	70000	Income tax Payable	24000
Land	92000	Stockholders Equity	283300
Buildings                                                        200000
Accumulated Depreciation-Buildings 68000	132000
Equipment                                                      83500
Accumulated Depreciatio-Equipment 47500	36000
	399000		399000