Question

The Green Thumb Gardener is a retail store that sells plants, soil, and decorative pots. On December 31, 2019, the firm's general ledger contained the accounts and balances that appear below.

ACCOUNTS AND BALANCES
Cash	$	6,200		Dr.
Accounts Receivable		3,100		Dr.
Allowance for Doubtful Accounts		57		Cr.
Merchandise Inventory		11,800		Dr.
Supplies		1,250		Dr.
Prepaid Advertising		900		Dr.
Store Equipment		8,400		Dr.
Accumulated Depreciation—Store Equipment		1,550		Cr.
Office Equipment		1,900		Dr.
Accumulated Depreciation—Office Equipment		330		Cr.
Accounts Payable		2,675		Cr.
Social Security Tax Payable		480		Cr.
Medicare Tax Payable		93		Cr.
Federal Unemployment Tax Payable
State Unemployment Tax Payable
Salaries Payable
Beth Argo, Capital		27,947		Cr.
Beth Argo, Drawing		20,500		Dr.
Sales		92,548		Cr.
Sales Returns and Allowances		1,150		Dr.
Purchases		47,900		Dr.
Purchases Returns and Allowances		480		Cr.
Rent Expense		6,500		Dr.
Telephone Expense		640		Dr.
Salaries Expense		14,600		Dr.
Payroll Taxes Expense		1,320		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, 2019, is $12,821.

3. During 2019, the firm had net credit sales of $40,000; the firm estimates that 0.7 percent of these sales will result in uncollectible accounts.
4. On December 31, 2019, an inventory of the supplies showed that items costing $300 were on hand.
5. On October 1, 2019, the firm signed a six-month advertising contract for $900 with a local newspaper and paid the full amount in advance.
6. On January 2, 2018, the firm purchased store equipment for $8,400. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $650.
7. On January 2, 2018, the firm purchased office equipment for $1,900. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $250.
8. On December 31, 2019, the firm owed salaries of $1,880 that will not be paid until 2020.
9. On December 31, 2019, the firm owed the employer’s social security tax (assume 6.2 percent) and Medicare tax (assume 1.45 percent) on the entire $1,880 of accrued wages.
10. On December 31, 2019, the firm owed federal unemployment tax (assume 0.6 percent) and state unemployment tax (assume 5.4 percent) on the entire $1,880 of accrued wages.

Required:

1. Prepare the Trial Balance section of a 10-column worksheet. The worksheet covers the year ended December 31, 2019.
2. Enter the adjustments above in the Adjustments section of the worksheet.
3. Complete the worksheet.

Analyze:
By what amount were the assets of the business affected by adjustments?

Answer 1

The Green Thumb Gardener
Worksheet
Year Ended December 31, 2019
Account Titles	Unadjusted Trial Balance		Adjustments		Adjusted Trial Balance		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	6200				6200				6200
Accounts receivable	3100				3100				3100
Allowance for doubtful accounts		57		280		337				337
Merchandise inventory	11800		12821	11800	12821				12821
Supplies	1250			950	300				300
Prepaid advertising	900			450	450				450
Store equipment	8400				8400				8400
Accumulated depreciation-store equipment		1550		1550		3100				3100
Office equipment	1900				1900				1900
Accumulated depreciation-office equipment		330		330		660				660
Accounts payable		2675				2675				2675
Social security tax payable		480		116.56		596.56				596.56
Medicare tax payable		93		27.26		120.26				120.26
Federal unemployment tax payable				11.28		11.28				11.28
State unemployment tax payable				101.52		101.52				101.52
Salaries payable				1880		1880				1880
Beth Argo, capital		27947				27947				27947
Beth Argo, drawing	20500				20500				20500
Sales		92548				92548		92548
Sales returns and allowances	1150				1150		1150
Purchases	47900				47900		47900
Purchase returns and allowances		480				480		480
Rent expense	6500				6500		6500
Telephone expense	640				640		640
Salaries expense	14600		1880		16480		16480
Payroll taxes expense	1320		256.62		1576.62		1576.62
Income summary			11800	12821	11800	12821	11800	12821
Supplies expense			950		950		950
Advertising expense			450		450		450
Depreciation expense-store equipment			1550		1550		1550
Depreciation expense-office equipment			330		330		330
Uncollectible accounts expense			280		280		280
Totals	126160.00	126160.00	30317.62	30317.62	143277.62	143277.62	89606.62	105849.00	53671.00	37428.62
Net income							16242.38			16242.38
Totals							105849.00	105849.00	53671.00	53671.00

Analyze:

Total assets decreased by $2539

$12821 - ($11800 + $950 + $450 + $280 + $1550 + $330) = -$2539