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 Prepaid selling expenses Dividends Sales $ 31,000 5,800 35,000 $537,000 Sales returns and allowances 17,900 5,200 216,000 50,000 16,000 37,000 107,000 Sales discounts Cost of goods sold Sales salaries expense Utilities expense Selling expenses Administrative expenses Additional Information Accrued and unpaid sales salaries amount to $1,400. Prepaid selling expenses of $3,200 have expired. A physical count of year-end merchandise inventory is taken to determine shrinkage and shows $29,300 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. O Focus

Answer 1

( A )
NO	DATE	GENERAL JOURNAL	DEBIT	CREDIT
1)	Dec-31	Sales salaries expense	$ 1,400
		Salaries payable		$ 1,400
		( to record accrued salaries )
2)	Dec-31	Selling expense	$ 3,200
		Prepaid Selling expense		$ 3,200
		( to record prepaid selling expense )
3)	Dec-31	Cost of goods sold	$ 1,700
		Merchandise Inventory		$ 1,700
		( to record adjustment for inventory shrinkage )
		( $ 31,000 - $ 29,300 )
(B)
NO	DATE	GENERAL JOURNAL	DEBIT	CREDIT
1)	Dec-31	Sales	$ 537,000
		Income summary		$ 537,000
		( to record revenue transferred to income summary )
2)	Dec-31	Income summary	$ 455,400
		Sales returns and allowances		$ 17,900
		Sales Discount		$ 5,200
		Cost of goods sold ( 216,000+1700 )		$ 217,700
		Sales salaries expense ( 50,000 + 1400 )		$ 51,400
		Utilities expense		$ 16,000
		Selling expense ( 37,000+3200 )		$ 40,200
		Administrative expense		$ 107,000
		( to record all expenses transferred to income summary )
3)	Dec-31	Income summary ( $ 537,000 - $ 455,400)	$ 81,600
		Retained earnings		$ 81,600
		( to record Net income transferred to Retained earnings )
4)	Dec-31	Retained earnings	$ 35,000
		Dividends		$ 35,000
		( to record Dividends paid out of Retained earnings)