Question

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	$	5,600		Dr.
Accounts Receivable		2,500		Dr.
Allowance for Doubtful Accounts		51		Cr.
Merchandise Inventory		11,200		Dr.
Supplies		1,190		Dr.
Prepaid Advertising		900		Dr.
Store Equipment		8,040		Dr.
Accumulated Depreciation—Store Equipment		1,490		Cr.
Office Equipment		1,540		Dr.
Accumulated Depreciation—Office Equipment		270		Cr.
Accounts Payable		2,615		Cr.
Social Security Tax Payable		420		Cr.
Medicare Tax Payable		87		Cr.
Federal Unemployment Tax Payable
State Unemployment Tax Payable
Salaries Payable
Beth Argo, Capital		24,899		Cr.
Beth Argo, Drawing		19,900		Dr.
Sales		89,548		Cr.
Sales Returns and Allowances		1,090		Dr.
Purchases		46,100		Dr.
Purchases Returns and Allowances		420		Cr.
Rent Expense		5,900		Dr.
Telephone Expense		580		Dr.
Salaries Expense		14,000		Dr.
Payroll Taxes Expense		1,260		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 $12,221.

3. During 2019, the firm had net credit sales of $34,000; the firm estimates that 0.7 percent of these sales will result in uncollectible accounts.
4. On December 31, 2019, an inventory of the supplies showed that items costing $270 were on hand.
5. 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.
6. On January 2, 2018, the firm purchased store equipment for $8,040. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $590.
7. On January 2, 2018, the firm purchased office equipment for $1,540. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $190.
8. On December 31, 2019, the firm owed salaries of $1,820 that will not be paid until 2020.
9. 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 $1,820 of accrued wages.
10. 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 $1,820 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?

Answer 1

										Amount in $
	Account Name	Unadjusted Trial Balance		Adjustments		Adjusted Trial Balance		Income Statement		Balance Sheet
		Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
	Cash	5600				5600	0			5600
	Accounts Receivable	2500				2500	0			2500
	Allowance for Doubtful accounts		51		238	0	289				289
	Merchandise Inventory	11200		1021		12221	0			12221
	Supplies	1190			920	270				270
	Prepaid Advertising	900			450	450				450
	Store Equipment	8040				8040	0			8040
	Accumulated Depreciation - Store Equipment		1490		1490	0	2980				2980
	Office Equipment	1540				1540	0			1540
	Accumulated Depreciation - office Equipment		270		270	0	540				540
	Accounts Payable		2615			0	2615				2615
	Social Security Tax Payable		420		112.84	0	532.84				532.84
	Medicare Tax Payable		87		26.39	0	113.39				113.39
	Federal Un employment Tax Payable				10.92	0	10.92				10.92
	State Un employment Tax payable				26.39	0	26.39				26.39
	Salaries Payable				1820	0	1820				1820
	Beth Argo, Capital		24899			0	24899				24899
	Beth Argo, Drawing	19900				19900	0			19900
	Sales		89548			0	89548		89548
	Sales Returns & Allowances	1090				1090	0	1090
	Purchase	46100				46100	0	46100
	Purchase returns & allowances		420			0	420		420
	Rent Expenses	5900				5900	0	5900
	Telephone Expenses	580				580	0	580
	Salaries Expenses	14000		1820		15820	0	15820
	Payroll Taxes Expense	1260		176.54		1436.54	0	1436.54
	Income summary				1021	0	1021	0	1021
	Supplies Expense			920		920	0	920
	Advertising Expense			450		450	0	450
	Depreciation Expense - Store Equipment			1490		1490	0	1490
	Depreciation Expense - Office Equipment			270		270	0	270
	Uncollectable Accounts Expense			238		238	0	238
	Total					0	0	0
	Net income (balancing figure)					0	0	16694.46			16694.46
	Grand Totals			6385.54	6385.54	124815.54	124815.54	90989	90989	50521	50521
	Adjustments:-
1	Adjustments for Merchandise Inventory on December 31,2019 =12221-11200 =1021
2	Adjustments for Bad Debts =34000*0.7% =238
3	Adjustments for supplies = 920 (1190 -270) , Closing balance of supplies is 270 on hand
4	Adjustments for Prepaid Advertising = 900*3/6, At the time of closing Books, 3 months prepaid Advertising exists
5	Depreciation for store equipment = (Original Cost - Salavage Value)/No.of Years = (8040-590)/5 =1490
6	Depreciation for Office equipment = (Original Cost - Salavage Value)/No.of Years = (1540-190)/5 =270
7	Outstanding Salaries of 1820 is accounted as salaray expense debited outstanding salaries credited
8	Adjustments for Social Security Tax = 1820*6.2% = 112.84
9	Adjustments for Medi care Tax = 1820*1.45% = 26.39
10	Adjustments for Federal Unemployment Tax = 1820*0.6% = 10.92
11	Adjustments for State Unemployment Tax = 1820*5.4% = 26.39