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	$	6,600		Dr.
Accounts Receivable		3,500		Dr.
Allowance for Doubtful Accounts		61		Cr.
Merchandise Inventory		12,200		Dr.
Supplies		1,290		Dr.
Prepaid Advertising		960		Dr.
Store Equipment		8,640		Dr.
Accumulated Depreciation—Store Equipment		1,590		Cr.
Office Equipment		2,140		Dr.
Accumulated Depreciation—Office Equipment		370		Cr.
Accounts Payable		2,715		Cr.
Social Security Tax Payable		520		Cr.
Medicare Tax Payable		89		Cr.
Federal Unemployment Tax Payable
State Unemployment Tax Payable
Salaries Payable
Beth Argo, Capital		30,047		Cr.
Beth Argo, Drawing		20,900		Dr.
Sales		94,548		Cr.
Sales Returns and Allowances		1,190		Dr.
Purchases		49,100		Dr.
Purchases Returns and Allowances		520		Cr.
Rent Expense		6,900		Dr.
Telephone Expense		680		Dr.
Salaries Expense		15,000		Dr.
Payroll Taxes Expense		1,360		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 $13,221.

During 2019, the firm had net credit sales of $44,000; the firm estimates that 0.6 percent of these sales will result in uncollectible accounts.

On December 31, 2019, an inventory of the supplies showed that items costing $320 were on hand.

On October 1, 2019, the firm signed a six-month advertising contract for $960 with a local newspaper and paid the full amount in advance.

On January 2, 2018, the firm purchased store equipment for $8,640. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $690.

On January 2, 2018, the firm purchased office equipment for $2,140. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $290.

On December 31, 2019, the firm owed salaries of $1,920 that will not be paid until 2020.

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 $1,920 of accrued wages.

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 $1,920 of accrued wages.

Required:

Prepare the Trial Balance section of a 10-column worksheet. The worksheet covers the year ended December 31, 2019.

Enter the adjustments above in the Adjustments section of the worksheet.

Complete the worksheet.

Analyze:
By what amount were the assets of the business affected by adjustments?

Answer 1

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Adjusting Entries:
Date	Account	Debit	Credit
a	Income Summary	$      12,200
	Merchandise Inventory		$      12,200
b	Merchandise Inventory	$      13,221
	Income Summary		$      13,221
c	Uncollectible Expense	$           264
	Allowance for Doubtful Accounts		$           264
d	Supplies Expense	$           970		1290-320
	Supplies		$           970
e	Advertising Expense	$           480		960/6*3
	Prepaid Advertising		$           480
f	Depreciation Expense-Store Equipment	$        1,590		(8640-690)/5
	Accumulated Depreciation-Store Equipment		$        1,590
g	Depreciation Expense-Office Equipment	$           370		(2140-290)/5
	Accumulated Depreciation-Office Equipment		$           370
h	Salaries Expense	$        1,920
	Salaries Payable		$        1,920
i	Payroll Tax Expense	$           147
	Social Security Tax Payable		$           119
	Medicare Tax Payable		$              28
j	Payroll Tax Expense	$           115
	Federal Unemployment Tax Payable		$              12
	State Unemployment Tax Payable		$           104

	Unadjusted		Adjustments		Adjusted		Income Statement		Balance Sheet
Account	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$    6,600				$    6,600				$    6,600
Accounts Receivable	$    3,500				$    3,500				$    3,500
Allowance for Doubtful Accounts		$         61		$       264		$       325				$       325
Merchandise Inventory	$ 12,200		$ 13,221	$ 12,200	$ 13,221				$ 13,221
Supplies	$    1,290			$       970	$       320				$       320
Prepaid Advertising	$        960			$       480	$       480				$       480
Store Equipment	$    8,640				$    8,640				$    8,640
Accumulated Depreciation—Store Equipment		$    1,590		$    1,590		$    3,180				$    3,180
Office Equipment	$    2,140				$    2,140				$    2,140
Accumulated Depreciation—Office Equipment		$       370		$       370		$       740				$       740
Accounts Payable		$    2,715				$    2,715				$    2,715
Social Security Tax Payable		$       520		$       119		$       639				$       639
Medicare Tax Payable		$         89		$         28		$       117				$       117
Federal Unemployment Tax Payable				$         12		$         12				$         12
State Unemployment Tax Payable				$       103		$       103				$       103
Salaries Payable				$    1,920		$    1,920				$    1,920
Beth Argo, Capital		$ 30,047				$ 30,047				$ 30,047
Beth Argo, Drawing	$ 20,900				$ 20,900				$ 20,900
Sales		$ 94,548				$ 94,548		$ 94,548
Sales Returns and Allowances	$    1,190				$    1,190		$    1,190
Purchases	$ 49,100				$ 49,100		$ 49,100
Purchases Returns and Allowances		$       520				$       520		$       520
Rent Expense	$    6,900				$    6,900		$    6,900
Telephone Expense	$        680				$       680		$       680
Salaries Expense	$ 15,000		$    1,920		$ 16,920		$ 16,920
Payroll Taxes Expense	$    1,360		$       262		$    1,622		$    1,622
Income Summary			$ 12,200	$ 13,221		$    1,021		$    1,021
Supplies Expense			$       970		$       970		$       970
Advertising Expense			$       480		$       480		$       480
Depreciation Expense—Store Equipment			$    1,590		$    1,590		$    1,590
Depreciation Expense—Office Equipment			$       370		$       370		$       370
Uncollectible Accounts Expense			$       264		$       264		$       264
Total	$130,460	$130,460	$ 31,277	$ 31,277	$135,887	$135,887	$ 80,086	$ 96,089	$ 55,801	$ 39,798
Net Income							$ 16,003			$ 16,003
Total							$ 96,089	$ 96,089	$ 55,801	$ 55,801

Asset Impact: 30656