Question

The following list includes selected permanent accounts and all of the temporary accounts from the December 31 unadjusted trial balance of Emiko Co., a business owned by Kumi Emiko. Emiko Co. uses a perpetual inventory system. Debit Credit Merchandise inventory $ 32,500 Prepaid selling expenses 6,100 K. Emiko, Withdrawals 38,000 Sales $ 549,000 Sales returns and allowances 18,500 Sales discounts 5,500 Cost of goods sold 222,000 Sales salaries expense 53,000 Utilities expense 17,500 Selling expenses 38,500 Administrative expenses 110,000 Additional Information Accrued and unpaid sales salaries amount to $1,700. Prepaid selling expenses of $3,500 have expired. A physical count of year-end merchandise inventory is taken to determine shrinkage and shows $30,200 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

a

Adjusting entries:

Account	Debit	Credit
Sales Salaries expense	$            1,700
Salaries payable		$            1,700
(Accrued salaries)
Selling epxenses	$            3,500
Prepaid selling expenses		$            3,500
(Expired expenses recognized)
Shrinkage expense	$            2,300
Inventory		$            2,300
(Physical count adjustment)

b

Account	Debit	Credit
Sales revenue	$        549,000
Income summary		$          76,500
Selling expenses		$          42,000
Sales returns and allowances		$          18,500
Sales discounts		$            5,500
Cost of goods sold		$        222,000
Sales salaries expense		$          54,700
Utilities expense		$          17,500
Administrative expenses		$        110,000
Shrinkage expense		$            2,300
(closing entry)

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