Question

Juan Morales Co. had the following account balances at year-end: Cost of Goods Sold $60,790, Inventory $17,260, Operating Expenses $31,620, Sales Revenue $123,450, Sales Discounts $1,390, and Sales Returns and Allowances $2,050. A physical count of inventory determines that merchandise inventory on hand is $12,290.
Prepare the adjusting entry necessary as a result of the physical count.
Prepare closing entries.

Answer 1

CR Adjusting entry Particulars Cost of goods sold Inventory To record the adjusting entry for inventory DR $ 4,970.00 =17260-12290 $ 4,970.00 Closing entries Particulars Sales revenue Income summary To close the revenue accounts DR $1,23,450.00 $1,23,450.00 $1,00,820.00 Income summary Cost of goods sold Operating expenses Sales return and allowances Sales discounts To close the expense accounts $ 65,760.00 =60790+4970 $ 31,620.00 $ 2,050.00 $ 1,390.00 $ 22,630.00 =123450-100820 Income summary Owner's capital To close the income summary account $ 22,630.00