Obtain all data that is necessary from the worksheet prepared for Whatnots in Problem 12.5B at the end of Chapter 12. Then follow the instructions to complete this problem.
INSTRUCTIONS
1. Record adjusting entries in the general journal as of December 31, 2013. Use 29 as the first journal page number. Include descriptions for the entries.
2. Record closing entries in the general journal as of December 31, 2013. Include descriptions.
3. Record reversing entries in the general journal as of January 1, 2014. Include descriptions.
Analyze: Assuming that the company did not record a reversing entry for salaries payable, what entry is required when salaries of $2,600 are paid on January 4? (Ignore payroll taxes withheld.)
Problem 12.5B
Whatnots is a retail seller of cards, novelty items, and business products. On December 31, 2013, the firm’s general ledger contained the following accounts and balances.
INSTRUCTIONS
1. Prepare the Trial Balance section of a 10-column worksheet. The worksheet covers the year ended December 31, 2013.
2. Enter the adjustments in the Adjustments section of the worksheet. Identify each adjustment with the appropriate letter.
3. Complete the worksheet.
Note: This problem will be required to complete Problem 13.4B in Chapter 13.
ACCOUNTS AND BALANCES
Cash | $ 3,235 Dr. |
Accounts Receivable | 6,910 Dr. |
Allowance for Doubtful Accounts | 600 Cr. |
Merchandise Inventory | 16,985 Dr. |
Supplies | 750 Dr. |
Prepaid Insurance | 2,400 Dr. |
Store Equipment | 6,000 Dr. |
Accumulated Depreciation—Store Equip. | 2,000 Cr. |
Store Fixtures | 15,760 Dr. |
Accumulated Depreciation—Store Fixtures | 4,100 Cr. |
Notes Payable | 4,000 Cr. |
Accounts Payable | 600 Cr. |
Interest Payable |
|
Social Security Tax Payable |
|
Medicare Tax Payable |
|
Federal Unemployment Tax Payable |
|
State Unemployment Tax Payable |
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Salaries Payable |
|
Preston Allen, Capital | 39,780 Cr. |
Preston Allen, Drawing | 8,000 Dr. |
Sales | 236,560 Cr. |
Sales Returns and Allowances | 6,000 Dr. |
Purchases | 160,000 Dr. |
Purchases Returns and Allowances | 2,000 Cr. |
Income Summary |
|
Rent Expense | 18,000 Dr. |
Telephone Expense | 2,400 Dr. |
Salaries Expense | 40,000 Dr. |
Payroll Tax Expense | 3,200 Dr. |
Supplies Expense |
|
Insurance Expense |
|
Depreciation Expense—Store Equipment |
|
Depreciation Expense—Store Fixtures |
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Uncollectible Accounts Expense |
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Interest Expense |
|
ADJUSTMENTS
a.–b. Merchandise inventory on hand on December 31, 2013, is $15,840.
c. During 2013, the firm had net credit sales of $160,000. Past experience indicates that 0.8 percent of these sales should result in uncollectible accounts.
d. On December 31, 2013, an inventory of supplies showed that items costing $245 were on hand.
e. On July 1, 2013, the firm purchased a one-year insurance policy for $2,400.
f. On January 2, 2011, the firm purchased store equipment for $6,000. The equipment was estimated to have a five-year useful life and a salvage value of $1,000.
g. On January 4, 2011, the firm purchased store fixtures for $15,760. At the time of the purchase, the fixtures were assumed to have a useful life of seven years and a salvage value of $1,410.
h. On October 1, 2013, the firm issued a six-month, $4,000 note payable at 9 percent interest with a local bank.
i. At year-end (December 31, 2013), the firm owed salaries of $1,450 that will not be paid until January 2014.
j. On December 31, 2013, the firm owed the employer’s social security tax (assume 6.2 percent) and Medicare tax (assume 1.45 percent) on the entire $1,450 of accrued wages.
k. On December 31, 2013, the firm owed federal unemployment tax (assume 1.0 percent) and state unemployment tax (assume 5.0 percent) on the entire $1,450 of accrued wages.
Analyze: After all adjustments have been recorded, what is the net book value of the company’s assets?
Problem 13.4B
Obtain all data that is necessary from the worksheet prepared for Whatnots in Problem 12.5B at the end of Chapter 12. Then follow the instructions to complete this problem.
INSTRUCTIONS
1. Record adjusting entries in the general journal as of December 31, 2013. Use 29 as the first journal page number. Include descriptions for the entries.
2. Record closing entries in the general journal as of December 31, 2013. Include descriptions.
3. Record reversing entries in the general journal as of January 1, 2014. Include descriptions.
Analyze: Assuming that the company did not record a reversing entry for salaries payable, what entry is required when salaries of $2,600 are paid on January 4? (Ignore payroll taxes withheld.)
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