Question

Here is the problem:

The Neon Lumber Company uses the periodic inventory method, and it has a policy of adjusting and closing its books only at year end. The following adjusted trial balance for the company was prepared after posting the normal adjusting entries on December 31, 2020:

Account Title	Debit	Credit
Cash	66,240
Accounts Receivable	140,500
Merchandise Inventory, January 1, 2020	289,620
Supplies on Hand	5,200
Prepaid Insurance	4,800
Prepaid Rent	56,000
Equipment	92,000
Accumulated Depreciation		16,460
Accounts Payable		96,800
Capital Stock		50,000
Retained Earnings, January 1, 2020		456,210
Dividends	4,000
Sales		910,120
Sales Discounts	4,220
Sales Returns and Allowances	6,530
Interest Revenue		820
Purchases	624,440
Purchase Discounts		4,650
Purchase Returns and Allowances		2,400
Transportation In	9,420
Advertising Expense	36,840
Sales Salaries Expense	120,550
Administrative Salaries Expense	60,300
Utilities Expense	9,560
Delivery Expenses (Freight Out)	2,610
Legal and Accounting Expense	3,200
Interest Expense	400
Miscellaneous Administrative Expense	1,030
Totals	1,537,460	1,537,460

The ending inventory balance at Dec. 31, 2020 was $280,000.

Required:

A. Following the example on page 242 of the textbook, prepare the income statement for the year ended December 31, 2020. Do your best to distinguish between selling expenses and administrative expenses. Both interest revenue and interest expense, of course, are non-operating items.

B. Using the example on page 249 of the textbook, prepare the statement of retained earnings for the year ended December. 31, 2020.

C. Using the example on page 250 and other locations in the textbook, prepare the balance sheet as of December. 31, 2020.

D. Prepare the closing entries as of December 31,2020

Answer 1