Question

The following list includes selected permanent accounts and all of the temporary accounts from the December 31, 2017, unadjusted trial balance of Emiko Co.. Emiko Co. uses a perpetual inventory system. Debit Credit Merchandise inventory $ 39,500 Prepaid selling expenses 7,500 Dividends 52,000 Sales $ 605,000 Sales returns and allowances 21,300 Sales discounts 6,900 Cost of goods sold 250,000 Sales salaries expense 67,000 Utilities expense 24,500 Selling expenses 45,500 Administrative expenses 124,000 Additional Information Accrued sales salaries amount to $1,700. Prepaid selling expenses of $2,800 have expired. A physical count of year-end merchandise inventory shows $34,400 of goods still available. (a) Use the above account balances along with the additional information, prepare the adjusting entries. (b) Use the above account balances along with the additional information, prepare the closing entries.

Answer 1

Adjusting entry

Date	account and explanation	debit	credit
	Cost of goods sold (39500-34400)	5100
	Merchandise inventory		5100
	(To record inventory adjusted)
	Sales salaries expense	1700
	Sales salaries payable		1700
	(To record salaries expense)
	Selling expense	2800
	Prepaid selling expense		2800
	(To record selling expense)

Closing entries

Date	account and explanation	debit	credit
	Sales	605000
	Income summary		605000
	(To close revenue)
	Income summary	548800
	Cost of goods sold (250000+5100)		255100
	Sales return and allowances		21300
	Sales discount		6900
	Sales salaries expense (67000+1700)		68700
	Utilities expense		24500
	Selling expense (45500+2800)		48300
	Administrative expense		124000
	(To close expense)
	Income summary	56200
	Retained earnings		56200
	(To close income summary)
	Retained earnings	52000
	Dividend		52000
	(To close dividend)