Merchandising Operations and the Accounting Cycle - Pearson

Requirement 2
252 Part One The Basic Structure of Accounting
Adjusting entries
2003
Dec. 31 Supplies expense.................................................... 2,580
Supplies.............................................................. 2,580
Dec. 31 Rent expense........................................................... 5,000
Prepaid rent ....................................................... 5,000
Dec. 31 Unearned sales revenue ($3,500 – $2,400).......... 1,100
Sales revenue..................................................... 1,100
Dec. 31 Amortization expense—furn. ($26,500/10) ...... 2,650
Accumulated amortization—furniture ......... 2,650
Dec. 31 Salary expense........................................................ 1,300
Salary payable ................................................... 1,300
Dec. 31 Interest expense ..................................................... 600
Interest payable................................................. 600
Dec. 31 Inventory ($65,800 – $60,500)............................... 5,300*
Cost of goods sold ............................................ 5,300
Closing entries
2003
Dec. 31 Sales revenue ...................................................... 347,800
Income summary.......................................... 347,800
Dec. 31 Income summary ............................................... 295,550
Cost of goods sold ........................................ 166,470
Sales discounts.............................................. 10,300
Sales returns and allowances...................... 8,200
Salary expense............................................... 84,050
Rent expense ................................................. 12,000
Amortization expense—furniture.............. 2,650
Utilities expense............................................ 5,800
Supplies expense .......................................... 2,580
Interest expense ............................................ 3,500
Dec. 31 Income summary ($347,800 – $295,550) ......... 52,250
Retained earnings......................................... 52,250
Dec. 31 Retained earnings .............................................. 48,000
Dividends ...................................................... 48,000
Income Summary
Clo. 295,550 Clo. 347,800
Clo. 52,250 Bal. 52,250
*Excess of inventory on hand over the balance in the Inventory account. This adjustment brings Inventory
to its correct balance.