Question

LO 4 Presented below is information relatod to Garland Co. for the month of Jamuary 2014 s 12,000 20,000 55,000 13,000 80,000 Beginning inventory Ending inventory 1 600 Insurance expense 21.600Rent expemse 218,000 Salaries and wages expense 000 Sales returns and allowances Freight-in Purchase discounts Purchase returns and allowances 5,000 Sales revenuc 10,000 Instructions Prepare the necessary closing entries 0

Answer 1

Calculation of cost of goods sold:

Beginning Inventory		21,600
Add: Purchases	218,000
Add: Freight In	7,000
Less: Purchase discount	(5,000)
Less: Purchase returns and allowances	(10,000)	210,000
Cost of goods available for sale		231,600
Less: Ending Inventory		(21,600)
Cost of Goods sold		210,000

Closing entries

S.no	Account titles and explanation	Debit	Credit
A.	Sales revenue	380,000
	Income summary		380,000
	(to close the sales revenue account by transferring it to the income summary)
B.	Income Summary	310,000
	Cost of goods sold		210,000
	Insurance expense		12,000
	Rent expense		20,000
	Salaries and wages expense		55,000
	Sales return and allowances		13,000
	(to close all the expenses account by transferring it to the income summary)
C.	Income summary	70,000
	Retained Earnings		70,000
	(to transfer the net balance of income summary to retained earnings)