Problem 5-4A
Adjusting entries and multi-step income statement—perpetual
CHECK FIGURES: 1. Income statement columns = $529,310;
2. Profit = $5,025
Information from the unadjusted trial balance of Jumbo's on December 31, 2017, the end of the annual accounting period, is as follows:
Debit |
Credit |
||
Cash |
8,100 |
||
Accounts receivable |
22,665 |
||
Merchandise inventory |
34,600 |
||
Store supplies |
2,415 |
||
Office supplies |
775 |
||
Prepaid insurance |
3,255 |
||
Equipment |
74,490 |
||
Accumulated depreciation, equipment |
13,655 |
||
Accounts payable |
8,000 |
||
Salaries payable |
0.0 |
||
Sally Fowler, capital |
168,965 |
||
Sally Fowler, withdrawals |
62,000 |
||
Interest income |
310 |
||
Sales |
529,000 |
||
Sales returns and allowances |
5,670 |
||
Cost of goods sold |
381,160 |
||
Salaries Expense |
96,300 |
||
Rent expense |
29,100 |
||
Supplies Expense |
0.0 |
||
Depreciation expense, equipment |
0.0 |
||
Insurance expense |
0.0 |
||
Totals |
719,930 |
719,930 |
|
Required
1. Record adjusting entries for the following in format.
a. A review of the store supplies on December 31, 2017, revealed a balance on hand of $2,000; a similar examination of the office supplies showed that $640 had been used.
b. The balance in the Prepaid Insurance account was reviewed and it was determined that $255 was unused at December 31, 2017.
c. The records show that the equipment was estimated to have a total estimated useful life of 10 years with a resale value at the end of its life of $14,490.
d. Accrued salaries payable, $1,800.
e. A count of the merchandise inventory revealed a balance on hand
December 31, 2017, of $33,800.
2. Using adjusted trial balance numbers, prepare multiple-step income statement showing the expenses in detail.
Analysis Component:
Explain why Interest income is shown under Other revenues and expenses on the multiple-step income statement.
Unadjusted Trial Balance | Adjustments | Adjusted Trial Balance | ||||
Debit | Credit | Debit | Credit | Debit | Credit | |
Cash | 8,100 | 8,100 | ||||
Accounts receivable | 22,665 | 22,665 | ||||
Merchandise inventory | 34,600 | 800 | 33,800 | |||
Store supplies | 2,415 | 415 | 2000 | |||
Office supplies | 775 | 640 | 135 | |||
Prepaid insurance | 3,255 | 3000 | 255 | |||
Equipment | 74,490 | 74,490 | ||||
Accumulated depreciation, equipment | 13,655 | 6000 | 19655 | |||
Accounts payable | 8,000 | 8,000 | ||||
Salaries payable | 0 | 1800 | 1800 | |||
Sally Fowler, capital | 1,68,965 | 1,68,965 | ||||
Sally Fowler, withdrawals | 62,000 | 62,000 | ||||
Interest income | 310 | 310 | ||||
Sales | 5,29,000 | 5,29,000 | ||||
Sales returns and allowances | 5,670 | 5,670 | ||||
Cost of goods sold | 3,81,160 | 800 | 3,81,960 | |||
Salaries Expense | 96,300 | 1800 | 98,100 | |||
Rent expense | 29,100 | 29,100 | ||||
Supplies Expense | 0 | 1055 | 1055 | |||
Depreciation expense, equipment | 0 | 6000 | 6000 | |||
Insurance expense | 0 | 3000 | 3000 | |||
Totals | 7,19,930 | 7,19,930 | 12655 | 12655 | 7,28,330 | 727730 |
7,20,530 | 7,19,930 | |||||
Difference | 600 | 600 | ||||
NOTE: THERE IS A DIFFERENCE OF $600 IN THE UN-ADJUSTED TRIAL BALANCE. |
||||||
INCOME STATEMENT | ||||||
Revenues: | ||||||
Sales | 5,29,000 | |||||
Sales returns and allowances | 5,670 | |||||
Net sales | 5,23,330 | |||||
Cost of goods sold | 3,81,960 | |||||
Gross profit | 1,41,370 | |||||
Operating expenses | ||||||
Salaries Expense | 98,100 | |||||
Rent expense | 29,100 | |||||
Supplies Expense | 1055 | |||||
Depreciation expense, equipment | 6000 | |||||
Insurance expense | 3000 | |||||
Total operating expenses | 1,37,255 | |||||
Operating income | 4,115 | |||||
Other income/(expenses) | ||||||
Interest income | 310 | |||||
Net income | 4,425 |
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