The Green Thumb Gallery is a retail store that sells plants, soil, and decorative pots. On December 31, 2013, the firm’s general ledger contained the accounts and balances that appear below.
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 below in the Adjustments section of the worksheet. Identify each adjustment with the appropriate letter.
3. Complete the worksheet.
ACCOUNTS AND BALANCES
Cash | $ 5,700 Dr. |
Accounts Receivable | 2,600 Dr. |
Allowance for Doubtful Accounts | 52 Cr. |
Merchandise Inventory | 11,300 Dr. |
Supplies | 1,200 Dr. |
Prepaid Advertising | 960 Dr. |
Store Equipment | 8,100 Dr. |
Accumulated Depreciation—Store Equipment | 1,500 Cr. |
Office Equipment | 1,600 Dr. |
Accumulated Depreciation—Office Equipment | 280 Cr. |
Accounts Payable | 2,625 Cr. |
Social Security Tax Payable | 430 Cr. |
Medicare Tax Payable | 98 Cr. |
Federal Unemployment Tax Payable |
|
State Unemployment Tax Payable |
|
Salaries Payable |
|
Beth Argo, Capital | 25,457 Cr. |
Beth Argo, Drawing | 20,000 Dr. |
Sales | 90,048 Cr. |
Sales Returns and Allowances | 1,100 Dr. |
Purchases | 46,400 Dr. |
Purchases Returns and Allowances | 430 Cr. |
Rent Expense | 6,000 Dr. |
Telephone Expense | 590 Dr. |
Salaries Expense | 14,100 Dr. |
Payroll Taxes Expense | 1,270 Dr. |
Income Summary |
|
Supplies Expense |
|
Advertising Expense |
|
Depreciation Expense—Store Equipment |
|
Depreciation Expense—Office Equipment |
|
Uncollectible Accounts Expense |
|
ADJUSTMENTS
a.–b. Merchandise inventory on December 31, 2013, is $12,321.
c. During 2013, the firm had net credit sales of $35,000; the firm estimates that 0.6 percent of these sales will result in uncollectible accounts.
d. On December 31, 2013, an inventory of the supplies showed that items costing $275 were on hand.
e. On October 1, 2013, the firm signed a six-month advertising contract for $960 with a local newspaper and paid the full amount in advance.
f. On January 2, 2012, the firm purchased store equipment for $8,100. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $600.
g. On January 2, 2012, the firm purchased office equipment for $1,600. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $200.
h. On December 31, 2013, the firm owed salaries of $1,830 that will not be paid until 2014.
i. 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 $1,830 of accrued wages.
j. On December 31, 2013, the firm owed federal unemployment tax (assume 0.8 percent) and state unemployment tax (assume 5.4 percent) on the entire $1,830 of accrued wages.
Analyze: By what total amount were the net assets of the business affected by adjustments?
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