Question

2. Net Income $185,000 EXCEL TEMPLATE periodic Inventory system. Appendix 2 PR 5-10A Periodic inventory accounts, multiple-step income statement, closing entries On December 31, 2045, the balances of the accounts appearing in the ledger of Wyman Company are as follows: Cash $13.500 Dividends $ 25,000 Accounts Receivable 72,000 Sales 3,280,000 Inventory, January 1, 2045 257,000 Purchases 2,650,000 Estimated Returns Inventory Purchases Returns and Allowances 93.000 January 1, 2015 35.000 Purchases Discounts 37,000 Office Supplies 3,000 Freight in 48,000 Prepaid Insurance 4500 Sales Salaries Expense 300,000 Land 150,000 Advertising Expense 45,000 Store Equipment 270,000 Delivery Expense 9,000 Accumulated Depreciation- Depreciation Expense- Store Equipment 55.900 Store Equipment 6,000 Office Equipment 78,500 Miscellaneous Selling Expense 12,000 Accumulated Depreciation- Office Salaries Expense 175,000 Office Equipment 16,000 Rent Expense 28,000 Accounts Payable 77,800 Insurance Expense 3,000 Salaries Payable 3,000 Office Supplies Expense 2,000 Customer Refunds Payable 50,000 Depreciation Expense- Unearned Rent 8,300 Office Equipment 1,500 Notes Payable 50,000 Miscellaneous Administrative Expense 3,500 Common Stock 150,000 Rent Revenue 7,000 Retained Earnings 365,600 Interest Expense 2,000 Instructions 1. Does Wyman Company use a periodic or perpetual inventory system? Explain. 2. Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 20Y5. The inventory as of December 31, 2045, was $305,000. The estimated cost of cus- tomer returns inventory for December 31, 2015, is estimated to increase to $40,000. 3. Prepare the closing entries for Wyman Company as of December 31, 20Y5. 4. What would be the net income if the perpetual inventory system had been used?

Answer 1

1 Since a periodic inventory system maintains accounts for freight in, purchases, purchase discounts, purchase returns hence Wyman company should use a periodic inventory system.

2

-175000 -28000 -3000 -2000 -1500 -3500 Office salaries expense rent expense insurance expense office supplies expense Depreciation expense-office equipment miscellaneous administration expense total administration expense total operating expenses Income from operations Other revenue and expense rent revenue less interest expense Net income -213000 -585000 180000 7000 -2000 5000 185000

-175000 -28000 -3000 -2000 -1500 -3500 Office salaries expense rent expense insurance expense office supplies expense Depreciation expense-office equipment miscellaneous administration expense total administration expense total operating expenses Income from operations Other revenue and expense rent revenue less interest expense Net income -213000 -585000 180000 7000 -2000 5000 185000

3)

Debit S Credit S 305000 3280000 93000 37000 5000 7000 3727000 Date Accounts title and Explanation 31-Dec merchandise inventory sales purchase returns and allowances purchase discounts increase in estimated return inventory rent revenue Income summary (To record closing entries) Income summary Merchandise inventory purchases Freight in Sales salaries expense Advertisement expense delivery expense depreciation expense - store equipment Miscellaneous selling expense office salaries expense rent expense insurance expense office supplies expense depreciation expense - office equipment miscellaneous administrative expense interest expense (To record income summary) 3542000 257000 2650000 48000 300000 45000 9000 6000 12000 175000 28000 3000 2000 1500 3500 2000

185000 Income summary Retained earning (To record income summary to retained earning) 185000 25000 Retained earning Dividends (To record dividends) 25000
4

If perpetual system is followed net income is same i.e. $185000