Question

In: Accounting

Question 3: (CLO 4 and 5)   (7 marks) The adjusted trial balance of Miracle Company contained the...

Question 3: (CLO 4 and 5)   

The adjusted trial balance of Miracle Company contained the following information:

                                                                                               Debit                       Credit   

Sales                                                                                                                $1,420,000

Interest Revenue                                                                                                    100,000

Sales Returns and Allowances                                                 $40,000                             

Sales Discounts                                                                         14,000                              

Cost of Goods Sold                                                                 872,000                              

Freight-out                                                                                  4,000                              

Advertising Expense                                                                 30,000                              

Interest Expense                                                                        36,000                              

Store Salaries Expense                                                             110,000                              

Utilities Expense                                                                       56,000                              

Depreciation Expense                                                                14,000                              

Dividends                                                                                 50,000

Instructions:

  1. Use the above information to prepare an income statement for the year ended December 31, 2019.
  2. Prepare the closing entries for Miracle Company at December 31, 2019.

Solutions

Expert Solution

Multi step income statement

Net sales:

Sales

1,420,000

Sales returns

- 40,000

Sales discounts - 14,000

Net sales revenue

1,366,000

Cost of goods sold

- 872,000

Gross profit

494,000

Operating expenses:

Freight-out

- 4,000

Advertising Expense  

- 30,000

Store Salaries Expense       

- 110,000

Utilities Expense    - 56,000
Depreciation Expense   - 14,000

Total Operating expenses

- 214,000

Operating profit

280,000

Other revenues:

Interest income

100,000

Other expenses:

Interest expense

- 36,000

Net income

$344,000

Journal

December 31, 2019. Sales revenue 1,420,000
Interest revenue 100,000
Income summary 1,520,000
December 31, 2019. Income summary 1,176,000
Sales Returns and Allowances       40,000      
Sales Discounts            14,000   
Cost of Goods Sold        872,000  
Freight-out        4,000        
Advertising Expense     30,000        
Interest Expense        36,000       
Store Salaries Expense         110,000
Utilities Expense       56,000         
Depreciation Expense         14,000     
December 31, 2019. Income summary 344,000
Retained earnings 344,000
December 31, 2019. Retained earnings 50,000
Dividends 50,000

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