Question

The following list includes selected permanent accounts and all of the temporary accounts from the December 31 unadjusted trial balance of Emiko Co., a business owned by Kumi Emiko. Emiko Co. uses a perpetual inventory system.

		Debit			Credit
Merchandise inventory	$	35,000
Prepaid selling expenses		6,600
Dividends		43,000
Sales				$	569,000
Sales returns and allowances		19,500
Sales discounts		6,000
Cost of goods sold		232,000
Sales salaries expense		58,000
Utilities expense		20,000
Selling expenses		41,000
Administrative expenses		115,000

Additional Information

Accrued and unpaid sales salaries amount to $2,200. Prepaid selling expenses of $4,000 have expired. A physical count of year-end merchandise inventory is taken to determine shrinkage and shows $31,700 of goods still available.

(a) Use the above account balances along with the additional information, prepare the adjusting entries.
(b) Use the above account balances along with the additional information, prepare the closing entries.

Answer 1

Journal Entries Date Account Title and Explaination Debit Post. Ref. Credit 2.200.00 Adjusting Entries Sales salaries expense Sales Salaries Payable (To record accrued Sales Salaries expense) 2,200.00 b $ 4,000.00 Selling Expense Prepaid Selling Expense (To record Expired portion of prepaid selling expense) 4,000.00 $ 3,300.00 3,300.00 Cost of Goods Sold ($35000-$31700) Merchandise Inventory (To record adjusting entry for shrinkage of merchandise inventory)

$ 569,000.00 Closing Entries Sales Income Summary (To close Revenue accounts) 569,000.00 $ 501,000.00 A A A A Income Summary Sales Returns Allowance Sales Discounts Cost of Goods Sold Sales Salaries Expense Utilities Expense Selling Expense Administrative Expense (To close all expenses accounts) 19,500.00 6,000.00 235,300.00 60.200.00 20,000.00 45,000.00 115,000.00 A A A $ 68,000.00 Income Summary Owners' Capital or Retained Earnings (To close balance of income summary account) 68,000.00