Question

104 Part 1 Financial Accounting Case 4-2 Save-Mart Save-Mart was a retail store. Its account balances on February 28 (the end of its fiscal year), before adjust- ments, were as shown below Credit Balances Debit Balances Accumulated depreciation on store equipment $ 11,420 88,500 88,970 100,000 33,500 988,700 Cash Accounts receivable Merchandise inventory Store equipment Supplies inventory Prepaid insurance Selling expense Sales salaries Miscellaneous general expense Sales discounts Interest expense Social Security tax expense 88,860 127,430 903,130 70,970 17,480 12,430 10,880 47,140 18,930 3,340 7,100 3,400 1,311,090 Notes payable Accounts payable Common stock Retained earnings Sales Total Total $1,311,090 7. The statement sent by the bank, adjusted for checks The data for the adjustments are 1. Cost of merchandise sold, $604,783. 2. Store equipment had a useful life of seven years. outstanding, showed a balance of $88,110. The dif- ference represented bank service charges. (All equipment was less than seven years old.) 3. Supplies inventory, February 28, S3,877. (Pur Questions chases of supplies during the year were debited to the Supplies Inventory account.) 1. Set up T accounts with the balances given above. 5. The note payable was at an interest rate of9 per- 2. Journalize and post adjusting entries, adding other 4. Expired insurance, $7,125. cent, payable monthly. It had been outstanding throughout the year. T accounts as necessary. 3. Journalize and post closing entries. 6. Sales salaries earned but not paid to employees, 4. Prepare an income statement for the year and a bal- $2,340 ance sheet as of February 28. Case 4-3 Copies Express
Questions 1-4

Answer 1

SAVE-MART Worksheet Balances February 28 Adjusted Balances Adjustments cr Accounts receivable.127430 Merchandise inventory903,130 Store equipment70970 (1) 604.783 298.347 11.420 88.970 Notes and wages 100,000 594,039 335,734 988.700 (6) 2,340 s general (5) 865 Bank sevice charges (7) 7s0

Cost of goods sold Depreciation Supplies expense Insurance expense ( 604,783 (2) 10,139 (3) 13,603 7,125 604,783 10.139 13,603 7125 | | (4) 1.311.090 311.00 639,605 639.605 1,324.434 1324.434

SAVE-MART COMPANY Income Statement for the Year Ended February 28 $988,700 3.340 985,360 604.783 380,577 Gross sales.. Less: Net sales.. Less: Cost of goods sold Gross Less: Expenses s10,880 49.480 18,930 7,965 3.400 10,139 13.603 7,125 750 cling expese sales salaneS..a Miscellaneous general expense Interest Expense."_" Social security tax expense.. Depreciation expense. Supplies used Insurance expenses Total expenses. 122,272 $258.305 Net income...

SAVE-MART COMPANY Balance Sheet as of February 28 Assets Merchandise inventory Supplies inventory Prepaid insurance.... s 88,110 127,430 298,347 3,877 305 523,069 Toted current assets.. Plant and Equipmen 70,970 Store equipme Less: Accumulated depreciation.... $572480 Equities Liabilities Accounts payable... Notes and wages payable Interest payabl. s 88,970 90,840 865 180,675 Total liabilities Stockholders' equity: ..- . $100,000 Retained earnings -291.805 .391.805 S572.480 Total equities