Year-End ProcessingPrograms Plus is a retail firm that sells computer programs for home an...

Year-End Processing

Programs Plus is a retail firm that sells computer programs for home and business use. On December 31, 2016, its general ledger contained the accounts and balances shown below:

The following accounts had zero balances:

Interest Payable

Salaries Payable

Income Summary

Supplies Expense

Insurance Expense

Depreciation Expense—Equipment

Uncollectible Accounts Expense

The data needed for the adjustments on December 31 are as follows:

a.–b. Ending merchandise inventory, $67,850.

c. Uncollectible accounts, 0.5 percent of net credit sales of $245,000.

d. Supplies on hand December 31, $1,020.

e. Expired insurance, $1,190.

f. Depreciation Expense—Equipment, $5,600.

g. Accrued interest expense on notes payable, $325.

h. Accrued salaries, $2,100.

i. Social Security Tax Payable (6.2 percent) and Medicare Tax Payable (1.45 percent) of accrued salaries.

INSTRUCTIONS

1. Prepare a worksheet for the year ended December 31, 2016.

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2. Prepare a classified income statement. The firm does not divide its operating expenses into selling and administrative expenses.

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3. Prepare a statement of owner’s equity. No additional investments were made during the period.

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4. Prepare a classified balance sheet. All notes payable are due within one year.

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5. Journalize the adjusting entries. Use 25 as the first journal page number.

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6. Journalize the closing entries.

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7. Journalize the reversing entries.

Analyze: By what percentage did the owner’s capital account change in the period from January 1, 2016, to December 31, 2016?