Question

Exercise 4-10 Preparing adjusting and closing entries for a merchandiser LO P3

The following list includes selected permanent accounts and all of the temporary accounts from the December 31, 2017, unadjusted trial balance of Emiko Co.. Emiko Co. uses a perpetual inventory system.

		Debit			Credit
Merchandise inventory	$	34,000
Prepaid selling expenses		6,400
Dividends		41,000
Sales				$	561,000
Sales returns and allowances		19,100
Sales discounts		5,800
Cost of goods sold		228,000
Sales salaries expense		56,000
Utilities expense		19,000
Selling expenses		40,000
Administrative expenses		113,000

Additional Information

Accrued sales salaries amount to $2,000. Prepaid selling expenses of $3,800 have expired. A physical count of year-end merchandise inventory shows $31,100 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

Journal entry worksheet

Required 1

Accrued sales salaries mouth to $2,000

Prepaid selling expenses of $3,800 have expired

A physical cost of year-end merchandise inventory shows $31,100 of goods still available.

Required 2

Record closing of credit balances in temporary accounts

Record closing of debit balances in temporary accounts

Record closing of income summary account

Record closing of dividends account

• 
  

Answer 1

(a)

No	Date	General Journal	Debit	Credit
1	Dec. 31	Sales salaries expense	2000
		Salaries payable		2000
		(To record accrued sales salaries)
2	Dec. 31	Selling expenses	3800
		Prepaid selling expenses		3800
		(To record expired prepaid selling expenses)
3	Dec. 31	Cost of goods sold ($34000 - $31100)	2900
		Merchandise inventory		2900
		(To record adjustment for closing merchandise inventory)

(b)

No	Date	General Journal	Debit	Credit
1	Dec. 31	Sales	561000
		Income summary		561000
		(To record closing of credit balances in temporary accounts)
2	Dec. 31	Income summary	489600
		Sales returns and allowances		19100
		Sales discounts		5800
		Cost of goods sold ($228000 + $2900)		230900
		Sales salaries expense ($56000 + $2000)		58000
		Utilities expense		19000
		Selling expenses ($40000 + $3800)		43800
		Administrative expenses		113000
		(To record closing of debit balances in temporary accounts)
3	Dec. 31	Income summary ($561000 - $489600)	71400
		Retained earnings		71400
		(To record closing of income summary account)
4	Dec. 31	Retained earnings	41000
		Dividends		41000
		(To record closing of dividends account)