Question

The trial balance of Bellemy Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year.

Bellemy Fashion Center Trial Balance November 30, 2020
		Debit		Credit
Cash		$  28,700
Accounts Receivable		33,700
Inventory		45,000
Supplies		5,500
Equipment		133,000
Accumulated Depreciation—Equipment				$  24,000
Notes Payable				51,000
Accounts Payable				48,500
Common Stock				90,000
Retained Earnings				8,000
Sales Revenue				757,200
Sales Returns and Allowances		4,200
Cost of Goods Sold		495,400
Salaries and Wages Expense		140,000
Advertising Expense		26,400
Utilities Expenses		14,000
Maintenance and Repairs Expense		12,100
Delivery Expense		16,700
Rent Expense		24,000		000,000
		$978,700		$978,700

Adjustment data:

1.    Supplies on hand totaled $1,500.

2.    Depreciation is $15,000 on the equipment.

3.    Interest of $11,000 is accrued on notes payable at November 30.

Other data:

1.    Salaries expense is 70% selling and 30% administrative.

2.    Rent expense and utilities expenses are 80% selling and 20% administrative.

3.    $30,000 of notes payable are due for payment next year.

4.    Maintenance and repairs expense is 100% administrative.

Instructions

a.    Journalize the adjusting entries.

b.    Prepare an adjusted trial balance.

c.    Prepare a multiple-step income statement (ignore taxes) and retained earnings statement for the year and a classified balance sheet as of November 30, 2020.

Answer 1

Adjustment Entries
1.    Supplies on hand totaled $1,500.
	Retained Earnings A/c (5500-1500)			Dr.	$    4,000.00
		To Supplies A/c				$    4,000.00
	(Being Supplies on hand overstated)
2.    Depreciation is $15,000 on the equipment.
	Depreciation A/c			Dr.	$ 15,000.00
		To Accumulated Depreciation A/c				$ 15,000.00
	(Being Depreciation Charged for the year)
3.    Interest of $11,000 is accrued on notes payable at November 30.
	Interest Expense A/c			Dr.	$ 11,000.00
		To Interest Payable A/c				$ 11,000.00
	(Being Interest accrued on notes payable)

Adjusted Trial Balance
				30-Nov-20
		Debit		Credit
Cash		28700
Accounts Receivable		33,700
Inventory		45,000
Supplies (5500-4000)		1,500
Equipment		133,000
Accumulated Depreciation—Equipment (24000+15000)				39000
Notes Payable				51,000
Interest Payable				11,000
Accounts Payable				48,500
Common Stock				90,000
Retained Earnings (Less overstated supplies i.e $4000)				4,000
Sales Revenue				757,200
Sales Returns and Allowances		4,200
Cost of Goods Sold		495,400
Salaries and Wages Expense		140,000
Advertising Expense		26,400
Utilities Expenses		14,000
Maintenance and Repairs Expense		12,100
Delivery Expense		16,700
Rent Expense		24,000
Interest Expenses		11,000
Depreciation Expenses		15,000
		$1,000,700		$1,000,700

Multiple Step Income Statement
	$		$
Sales revenue	757,200
Less: Sales Returns	4,200		753,000
Cost of Goods Slod			-495,400
Gross Profit			257,600
Operating Expenses
Administrative Expenses
Salaries and Wages (30% of 140000)	42000
Rent Expenses (20% of 24000)	4800
Utilities Expenses (20% of 14000)	2800
Maintenance and Repairs Expense	12,100
Advertising Expense	26,400
Depreciation Expenses	15,000
Selling Expenses
Salaries and Wages (70% of 140000)	98000
Rent Expenses (80% of 24000)	19200
Utilities Expenses (80% of 14000)	11200
Delivery Expense	16,700
Total Expenses	248200		-248200
Operating Income			9,400
Interest Expenses	11,000		-11,000
Net Income			-1,600

Balance Sheet
	$		$
Assets
Non Current Assets
Equipment	133,000		133,000
Current Assets
Cash	28700
Accounts Receivable	33,700
Inventory	45,000
Supplies	1,500		108900
Total Assets			241,900
Equity & Liabilities
Owner equity
Common Stock	90,000
Retained Earnings (4000-1600)	2,400		92,400
Non Current Liabilities
Notes payable ($30000)	30000		30000
Current Liabilities
Accumulated Depreciation—Equipment	39000
Notes payable ($51000-$30000)	21000
Interest Payable	11,000
Accounts Payable	48,500		119500
Total Equity & Liabilities			241,900