Question

P3.10 (LO 2, 3, 4,5) (Adjusting and Closing) Presented below is the December 31 trial balance of New York Boutique. New York Boutique Trial Balance December 31 Credit Debit $ 18,500 32,000 $ 700 80,000 5.100 84,000 Cash Accounts Receivable Allowance for Doubtful Accounts Inventory, December 31 Prepaid Insurance Equipment Accumulated Depreciation---Equipment Notes Payable Common Stock Retained Earnings Sales Revenue Cost of Goods Sold Salaries and Wages Expense (sales) Advertising Expense Salaries and Wages Expense administrative) Supplies Expense 35,000 28,000 80,600 10,000 600,000 408,000 50,000 6,700 65,000 5,000 $754,300 $754,300 Instructions a. Construct T-accounts and enter the balances shown. b. Prepare adjusting journal entries for the following and post to the T-accounts. (Omit explanations.) Open additional T-accounts as necessary. (The books are closed yearly on December 31.) 1. Bad debt expense to be recorded is $1,400. 2. Equipment is depreciated based on a 7-year life (no salvage value). 3. Insurance expired during the year $2,550. 4. Interest accrued on notes payable $3,360. 5. Sales salaries and wages earned but not paid $2,400. 6. Advertising paid in advance $700. 7. Office supplies on hand $1,500, charged to Supplies Expense when purchased. c. Prepare closing entries and post to the accounts. P 11 11

Answer 1

Answer:

(a), (b), (c)

Cash 18,500 Accounts Receivable 32,000 Bal. Bal. Allow. for Doubtful Accts. Bal. 700 Adj. 1,400 2.100

Inventory 80,000 Equipment 84,000 Bal. Bal. Accum. Depr.-Equipment Bal. 35,000 Adj. 12,000 47.000 Prepaid Insurance 5,100 Adj. 2,550 2.550 Notes Payable Bal. Interest Expense 3,360 Cls. Bal. 28,000 Bal. 3,360 Common Stock Bal. 80,600 Cls. Sales Revenue 600,000 Bal. Insurance Expense 2.550 Cls. 600,000 Adj. 2.550 Salaries and Wages Expense (Sales) Bal. 50,000 Cls. 52,400 Bal. Adj. 2.400 52,400 52,400 Salaries and Wages Expense Advertising Expense (Administrative) 6,700 Adj. 700 Adj. 65.000 Cls. 65.000 Cls. 6,000 6.700 6.700 Bad Debt Expense 1,400 Cls. 1.400 Bal. Prepaid Advertising 700 Adj. Supplies Expense 5,000 Adj. Cls. 5,000 1,500 Adj. 3,500 5.000 Interest Payable Adj. 3,360 Adj. Depr. Exp. 12.000 Cls. Income Summary 12.000 Exp. 554,210 Sales 600,000 Inc. 45,790 600,000 600,000 Supplies 1,500 Salaries and Wages Payable Adj. 2,400 Adj. Retained Earnings Bal. 10,000 Bal. Inc. 45,790 Bal. 55,790 Cost of Goods Sold 408.000 Cls. 408,000 (b) -1- Bad Debt Expense... ..1,400.

Allowance for Doubtful Accounts... .1,400.... -2- 12,000.. Depreciation Expense ($84,000 = 7)... Accumulated Depreciation Equipment. 12,000.... -3- .2,550 Insurance Expense. Prepaid Insurance..... 2,550.... -4- 3,360 Interest Expense...... Interest Payable. .3,360.... -5- 2,400. Salaries and Wages Expense (Sales). Salaries and Wages Payable..... .2,400.... -6- .7.00. Prepaid Advertising Expense. Advertising Expense.... .700.... -7- .1.5.0.0. Supplies.... Supplies Expense.. 1,500.... (c) Dec. 31 Sales Revenue 600,000 Income Summary 600,000 Dec. 31

Income Summary 554,210 Cost of Goods Sold 408,000 6,000 65,000 52,400 Advertising Expense Salaries and Wages Expense (Admin.) Salaries and Wages Expense (Sales) Supplies Expense Insurance Expense Bad Debt Expense 3,500 2,550 1,400 12,000 Depreciation Expense Interest Expense 3,360 Dec. 31 45,790 Income Summary Retained Earnings 45,790