Question

Prepare adjusting and closing entries. E5.7 (LO 4) Tim Jarosz Company had the following account balances at year-end: Cost of Goods Sold $60,000, Inventory $15,000, Operating Expenses $29,000, Sales Revenue $115,000, Sales Discounts Exercises 5-43 $1,200, and Sales Returns and Allowances $1,700. A physical count of inventory determines that mer- chandise inventory on hand is $13,600. Instructions a. Prepare the adjusting entry necessary as a result of the physical count. b. Prepare closing entries.

Answer 1

a.

Unadjusted inventory = $15,000

Ending inventory = $13,600

Inventory loss = Unadjusted inventory - Ending inventory

= 15,000-13,600

= $1,400

General Journal	Debit	Credit
Cost of goods sold	$1,400
Inventory		$1,400
( To record the inventory loss)

b.

Unadjusted cost of goods sold = $60,000

Adjusted cost of goods sold = Unadjusted cost of goods sold+ Inventory loss

= 60,000+1,400

= $61,400

General Journal	Debit	Credit
Sales revenue	$115,000
Income Summary		$115,000
( To close revenues)
Income Summary	$93,300
Sales discount		$1,200
Sales returns and allowances		$1,700
Cost of goods sold		$61,400
Operating expenses		$29,000
( To close expenses)
Income Summary	$21,700
Retained earnings		$21,700
( To close income summary)

Kindly comment if you need further assistance.

Thanks‼!