Question

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 11,420 Accumulated depreciation on store equipment $ 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 Total 88,500 88,970 100,000 33,500 988,700 $ 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 $1,311,090 7. The statement sent by the bank, adjusted for checks outstanding, showed a balance of $88,110. The dif- ference represented bank service charges. The data for the adjustments are 1. Cost of merchandise sold, $604,783. 2. Store equipment had a useful life of seven years. (All equipment was less than seven years old.) 3. Supplies inventory, February 28, $3,877. (Pur- chases of supplies during the year were debited to the Supplies Inventory account.) 4. Expired insurance, $7,125. 5. The note payable was at an interest rate of 9 per- cent, payable monthly. It had been outstanding throughout the year. 6. Sales salaries earned but not paid to employees, $2,340. Questions ing entries, adding other 1. Set up T accounts with the balances given a 2. Journalize and post adjusting entries, ada T accounts as necessary. 3. Journalize and post closing entries. 4. Prepare an income statement for the year ance sheet as of February 28. the year and a bal-

Please use T accounts.

Answer 1

Page-1 save -mart was a feb-28 the below Save mart. betail store, it acounts balances on. table is the balance sheet for the Balances feb-28 do 88, 860 127, 430 | 903, 130 70,970 17, 480 12, 430 Adjusted adjustments balances cr. I do I co do TCG. ) 950 85,110 604,783 1,27, 430 3) 13,603 298,347 (4 7,125 40,970 (2) 10,139 3877 1,420 21,559 88970 88500 88,970 90,840 (6) 2,340 (5) 86.5 cash Accounts receivable mechanistic investory slose equipment Supplies inventory Prepaid insubance Accomodated depreciation Accounts payable notes a wages payable Interest payable Commen stock betained earnings sales sales discounts selling expense sales salaries miscellaneous expense Interest expense social security tox Bank seculce charges cost of goods sold depreciation supplies expense Insurance expense 865 100,000 35,500 335134 985,700 1,00,000 3), 500 5941039 988,700 33,40 10,880 47, 140 18, 9 30 7.100 3,400 (62,340 $) 865 3,340 19 880 49,480 18930 1,965 3,400 750 7150 1604, 783 16, 139 13, 603 7, 125 1804, 783 10,139 13,603 7,125 1,32468 1,324,434| 1,51090 11311, 690639, 605 639,605

Page 2 company for year ended feb-28 988,700 3,340 985, 360 604, 783 380, 577 save-mart Increase statement Gooss sales. - Less: sales discount Net sales Less: cost of goods sold Gross margin Less expenses selling expense- sales salaries miscellaneous general expense Interest expense social society tax expense- Depreciation expense- supplies used Insurance expense- Bank service charge Total expenses Net Income 10, 880 ua, uso 18,930 1,965 31400 10,139 13,603 7,125 750 122, 272 $255, 305

Page 3 Save- mort Balance sheet of Company Feb-28 Cuttent assets cash Accounts receivable Mechanilisc inventory supplies inventory Prepaid insurance Total current assets plant & equipment store equipment Less accumulated depreciation 88,110 127, 430 298,347 3,877 5305 523, 069 $70,970 ( 21,559). - 49,411 Total assets $572,480

Page - 4 Equities $ 88,970 90,840 865 180, 675 Liabilities Accounts payable Notes & wages payable Interest payable Tolal liabilities stock holder's equity common stock betained earnings Total equities $ 100,000 291, 805 391,805 $572, 480