Question

Question 3

The following trial balance was taken from the books of Venus Corporation at December 31, 2020:

Account                                                                                                           Debit       Credit

Cash........................................................................................................    $   40,000

Accounts Receivable..............................................................................       106,000

Prepaid Rent ...........................................................................................         12,800     

Note Receivable......................................................................................           8,000

Merchandise Inventory...........................................................................         54,000

Unexpired Insurance...............................................................................           4,800

Furniture and Equipment........................................................................       138,000

Accumulated Depreciation.....................................................................                           15,000

Accounts Payable...................................................................................                           12,600

Common Shares......................................................................................                           44,000

Retained Earnings...................................................................................                           65,000

Sales........................................................................................................                           410,000

Cost of Goods Sold.................................................................................       128,000

Salaries Expense.....................................................................................         53,000

       Totals...............................................................................................    $ 546,600    $ 546,600

At year end, the following items have not yet been recorded.

1.    Insurance expired during the year, $ 3,000.

2.    Depreciation on furniture and equipment, 10% per year.

3.    Interest at 9% is receivable on the note for one full year.

4.    Prepaid rent used up during the year, $6,000.

5.    Accrued salaries at December 31, $ 6,200.

Instructions

a)         Prepare in good form the necessary adjusting entries, adding any new accounts which you may need. Narratives (explanations) are not required for journal entries.

Question 3 (continued)

b)    Prepare the necessary closing entries.

Answer 1

a. Adjusting Entries:

Date	Account title and explanation	Debit	Credit
Dec 31,2020	Insurance expense	$3,000
	Prepaid insurance		$3,000
	[To record insurance expense]
Dec 31,2020	Depreciation Expense [138000 x 10%]	$13,800
	Accumulated depreciation		$13,800
	[To record depreciation expense]
Dec 31,2020	Interest receivable [8,000 x 9%]	$720
	Interest revenue		$720
	[To record accrues interest revenue]
Dec 31,2020	Rent expense	$6,000
	Prepaid rent		$6,000
	[To record rent expense]
Dec 31,2020	Salaries expense	$6,200
	Salaries payable		$6,200
	[To record accrued salaries expense]

b. Closing Entries:

Date	Account title and explnation	Debit	Credit
Dec 31,2020	Sales	$410,000
	Interest revenue	$720
	Income Summary		$410,720
	[To close revenue accounts]
Dec 31,2020	Income Summary	$210,000
	Cost of goods sold		$128,000
	Salaries expense [53000+6200]		$59,200
	Insurance expense		$3,000
	Depreciation expense		$13,800
	Rent expense		$6,000
	[To close expenses account]
Dec 31,2020	Income summary [410720-210000]	$200,720
	Retained earnings		$200,720
	[To close cincome summary account]