Question

The Green Thumb Gardener is a retail store that sells plants, soil, and decorative pots. On December 31, 2019, the firm's general ledger contained the accounts and balances that appear below. ACCOUNTS AND BALANCES Cash $ 4,800 Dr. Accounts Receivable 1,700 Dr. Allowance for Doubtful Accounts 43 Cr. Merchandise Inventory 10,400 Dr. Supplies 1,110 Dr. Prepaid Advertising 1,080 Dr. Store Equipment 7,560 Dr. Accumulated Depreciation—Store Equipment 1,410 Cr. Office Equipment 1,060 Dr. Accumulated Depreciation—Office Equipment 190 Cr. Accounts Payable 2,535 Cr. Social Security Tax Payable 340 Cr. Medicare Tax Payable 79 Cr. Federal Unemployment Tax Payable State Unemployment Tax Payable Salaries Payable Beth Argo, Capital 21,015 Cr. Beth Argo, Drawing 19,100 Dr. Sales 85,548 Cr. Sales Returns and Allowances 1,010 Dr. Purchases 43,700 Dr. Purchases Returns and Allowances 340 Cr. Rent Expense 5,100 Dr. Telephone Expense 500 Dr. Salaries Expense 13,200 Dr. Payroll Taxes Expense 1,180 Dr. Income Summary Supplies Expense Advertising Expense Depreciation Expense—Store Equipment Depreciation Expense—Office Equipment Uncollectible Accounts Expense ADJUSTMENTS a.–b. Merchandise inventory on December 31, 2019, is $11,421. During 2019, the firm had net credit sales of $26,000; the firm estimates that 0.5 percent of these sales will result in uncollectible accounts. On December 31, 2019, an inventory of the supplies showed that items costing $230 were on hand. On October 1, 2019, the firm signed a six-month advertising contract for $1,080 with a local newspaper and paid the full amount in advance. On January 2, 2018, the firm purchased store equipment for $7,560. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $510. On January 2, 2018, the firm purchased office equipment for $1,060. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $110. On December 31, 2019, the firm owed salaries of $1,740 that will not be paid until 2020. On December 31, 2019, the firm owed the employer’s social security tax (assume 6.2 percent) and Medicare tax (assume 1.45 percent) on the entire $1,740 of accrued wages. On December 31, 2019, the firm owed federal unemployment tax (assume 0.6 percent) and state unemployment tax (assume 5.4 percent) on the entire $1,740 of accrued wages. Required: Prepare the Trial Balance section of a 10-column worksheet. The worksheet covers the year ended December 31, 2019. Enter the adjustments above in the Adjustments section of the worksheet. Complete the worksheet. Analyze: By what amount were the assets of the business affected by adjustments?

Answer 1

Green Thumb Gardener Adjusting Enteries Trans. Particulars a. Merchandise Inventory a/c To Income Summary (Inventory adjusted) Dr. Debit in $ Credit in $ 1021 1021 130 Uncollectible accounts Expense a/c Dr. To Allowance for Doubtful accounts (To estimate bad debts) 26000 x 0.5% = 130 130 d. 880 Supplies Expense a/c Dr. To Supplies (Supplies Expensed) 1110-230 880 e. Advertising Expense a/c Dr. To Prepaid Advertising (Advertising expensed ) = 1080 / 2 540 f. 1410 Depreciation Expense - Store Equip a/c Dr To Accum. Depre - Store Equip (To record depeciation) (7560 - 510 )/5 1410 190 Depreciation Expense - Off. Equip a/c Dr. To Accum. Depre - Off Equip (To record depeciation) (1060 - 110 )/5 190 Dr. 1740 Salaries Expense a/c To Salaries Payable (Salary expense accrued) 1740 133 108 Payroll Tax Expense a/c Dr. To Social Security Tax Payable To Medicare Tax Payable (Payroll tax expense recorded) 25 j. 104 10 Payroll Tax Expense a/c Dr. TO FUTA Tax Payable TO SUTA Tax Payable (Payroll tax expense recorded)

Worksheet For the period ending 31.12.2019 173 173 104 94 Particulars Cash Accounts Receivable Allowance for Doubtful accounts Merchandise Inventory Supplies Prepaid Advertising Store Equipment Accum. Depre - Store Equip Office Equipment Accum. Depre- Off Equip Accounts Payable Social Security Tax Payable Medicare Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Salaries Payable Beth Argo, Capital Beth Argo, Drawing Sales Sales Return and Allowances Purchases Purchase Return and Allowances Rent Expense Telephone Expense Salaries Expense Payroll Tax Expense Income Summary Supplies Expense Advertising Expense Depreciation Expense - Store Equip Depreciation Expense - Off. Equip Uncollectible accounts Expense Totals Net Income Unadjusted Adjustments Adjusted Income Statement Balance Sheet Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 4800 4800 4800 1700 1700 1700 130 10400 1021 11421 11421 1110 880 230 230 1080 540 540 540 7560 7560 7560 1410 1410 2820 2820 1060 1060 1060 190 190 380 380 2535 2535 2535 340 108 448 448 104 10 10 94 94 1740 1740 1740 21015 21015 21015 19100 19100 19100 85548 85548 85548 1010 1010 1010 43700 43700 43700 340 340 340 5100 5100 5100 500 500 500 13200 1740 14940 14940 1180 238 1418 1418 1021 1021 1021 17091 880 880 880 540 540 540 1410 1410 1410 190 190 190 130 130 130 111500 111500 6149 6 149 116229 116229 69818 86909 46411 46411 17091