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 $ 5,000 Dr. Accounts Receivable 1,900 Dr. Allowance for Doubtful Accounts 45 Cr. Merchandise Inventory 10,600 Dr. Supplies 1,130 Dr. Prepaid Advertising 900 Dr. Store Equipment 7,680 Dr. Accumulated Depreciation—Store Equipment 1,430 Cr. Office Equipment 1,180 Dr. Accumulated Depreciation—Office Equipment 210 Cr. Accounts Payable 2,555 Cr. Social Security Tax Payable 360 Cr. Medicare Tax Payable 81 Cr. Federal Unemployment Tax Payable State Unemployment Tax Payable Salaries Payable Beth Argo, Capital 21,851 Cr. Beth Argo, Drawing 19,300 Dr. Sales 86,548 Cr. Sales Returns and Allowances 1,030 Dr. Purchases 44,300 Dr. Purchases Returns and Allowances 360 Cr. Rent Expense 5,300 Dr. Telephone Expense 520 Dr. Salaries Expense 13,400 Dr. Payroll Taxes Expense 1,200 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 $11,621. During 2019, the firm had net credit sales of $28,000; the firm estimates that 0.7 percent of these sales will result in uncollectible accounts. On December 31, 2019, an inventory of the supplies showed that items costing $240 were on hand. 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. On January 2, 2018, the firm purchased store equipment for $7,680. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $530. On January 2, 2018, the firm purchased office equipment for $1,180. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $130. On December 31, 2019, the firm owed salaries of $1,760 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 $1,760 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 $1,760 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	$      10,600
	Merchandise Inventory		$      10,600
b	Merchandise Inventory	$      11,621
	Income Summary		$      11,621
c	Uncollectible Expense	$           196
	Allowance for Doubtful Accounts		$           196
d	Supplies Expense	$           890		1130-240
	Supplies		$           890
e	Advertising Expense	$           450		900/6*3
	Prepaid Advertising		$           450
f	Depreciation Expense-Store Equipment	$        1,430		(7680-530)/5
	Accumulated Depreciation-Store Equipment		$        1,430
g	Depreciation Expense-Office Equipment	$           210		(1180-130)/5
	Accumulated Depreciation-Office Equipment		$           210
h	Salaries Expense	$        1,760
	Salaries Payable		$        1,760
i	Payroll Tax Expense	$           135
	Social Security Tax Payable		$           109
	Medicare Tax Payable		$              26
j	Payroll Tax Expense	$           106
	Federal Unemployment Tax Payable		$              11
	State Unemployment Tax Payable		$              95
	Assets Affected by		$      11,621

	Unadjusted		Adjustments		Adjusted		Income Statement		Balance Sheet
Account	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$    5,000				$    5,000				$    5,000
Accounts Receivable	$    1,900				$    1,900				$    1,900
Allowance for Doubtful Accounts		$         45		$       196		$       241				$       241
Merchandise Inventory	$ 10,600		$ 11,621	$ 10,600	$ 11,621				$ 11,621
Supplies	$    1,130			$       890	$       240				$       240
Prepaid Advertising	$        900			$       450	$       450				$       450
Store Equipment	$    7,680				$    7,680				$    7,680
Accumulated Depreciation—Store Equipment		$    1,430		$    1,430		$    2,860				$    2,860
Office Equipment	$    1,180			$       210	$       970				$       970
Accumulated Depreciation—Office Equipment		$       210				$       210				$       210
Accounts Payable		$    2,555				$    2,555				$    2,555
Social Security Tax Payable		$       360		$       109		$       469				$       469
Medicare Tax Payable		$         81		$         26		$       107				$       107
Federal Unemployment Tax Payable				$         11		$         11				$         11
State Unemployment Tax Payable				$         95		$         95				$         95
Salaries Payable				$    1,760		$    1,760				$    1,760
Beth Argo, Capital		$ 21,851				$ 21,851				$ 21,851
Beth Argo, Drawing	$ 19,300				$ 19,300				$ 19,300
Sales		$ 86,548				$ 86,548		$ 86,548
Sales Returns and Allowances	$    1,030				$    1,030		$    1,030
Purchases	$ 44,300				$ 44,300		$ 44,300
Purchases Returns and Allowances		$       360				$       360		$       360
Rent Expense	$    5,300				$    5,300		$    5,300
Telephone Expense	$        520				$       520		$       520
Salaries Expense	$ 13,400		$    1,760		$ 15,160		$ 15,160
Payroll Taxes Expense	$    1,200		$       241		$    1,441		$    1,441
Income Summary			$ 10,600	$ 11,621		$    1,021		$    1,021
Supplies Expense			$       890		$       890		$       890
Advertising Expense			$       450		$       450		$       450
Depreciation Expense—Store Equipment			$    1,430		$    1,430		$    1,430
Depreciation Expense—Office Equipment			$       210		$       210		$       210
Uncollectible Accounts Expense			$       196		$       196		$       196
Total	$113,440	$113,440	$ 27,398	$ 27,398	$118,088	$118,088	$ 70,927	$ 87,929	$ 47,161	$ 30,159
Net Income							$ 17,002			$ 17,002
Total							$ 87,929	$ 87,929	$ 47,161	$ 47,161