Question

In: Accounting

The Green Thumb Gardener is a retail store that sells plants, soil, and decorative pots. On...

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.

  1. 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.
  2. On December 31, 2019, an inventory of the supplies showed that items costing $300 were on hand.
  3. 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.
  4. 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.
  5. 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.
  6. On December 31, 2019, the firm owed salaries of $1,880 that will not be paid until 2020.
  7. 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.
  8. 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?

Solutions

Expert Solution

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


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