Question

Nix’It Company’s ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix’It uses the perpetual inventory system). Merchandise inventory $ 38,800 Sales returns and allowances $ 6,300 T. Nix, Capital 117,300 Cost of goods sold 105,600 T. Nix, Withdrawals 7,000 Depreciation expense 10,500 Sales 159,800 Salaries expense 33,500 Sales discounts 3,100 Miscellaneous expenses 5,000 A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $37,550. Prepare journal entries to close the balances in temporary revenue and expense accounts. Remember to consider the entry for shrinkage from QS 5-9.

(The solution from QS 5-9 is required to complete this question.) (QS 5-9) [The following information applies to the questions displayed below.] Nix’It Company’s ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix’It uses the perpetual inventory system). Merchandise inventory $ 38,800 Sales returns and allowances $ 6,300 T. Nix, Capital 117,300 Cost of goods sold 105,600 T. Nix, Withdrawals 7,000 Depreciation expense 10,500 Sales 159,800 Salaries expense 33,500 Sales discounts 3,100 Miscellaneous expenses 5,000 A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $37,550. Prepare the entry to record any inventory shrinkage.

Answer 1

Event	Account Titles and Explanations	Debit	Credit
1	Sales	$ 159,800
	Income summary		$ 159,800
2	Income Summary	$ 165,250
	Sales Discount		$ 3,100
	Sales Returns and allowance		$ 6,300
	Cost of goods sold                ( $ 105,600 + ( $ 38,800 (-) $ 37,550 )		$ 106,850
	Depreciation expense		$ 10,500
	Salaries expense		$ 33,500
	Miscellaneous expense		$ 5,000
3	T. Nix, Capital ( $ 165,250 (-) $ 159,800 )	$ 5,450
	Income summary		$ 5,450
4	T. Nix, Capital	$ 7,000
	T. Nix, Withdrawals		$ 7,000
Event	Account Titles and Explanations	Debit	Credit
1	Cost of goods sold ( $ 38,800 (-) $ 37,550 )	$ 1,250
	Inventory		$ 1,250
	(To record inventory shrinkage)