Question

Preparing Adjusting Entries, Financial Statements, and Closing Entries

Fischer Card Shop is a small retail shop. Fischer’s balance sheet at year-end 2014 is as follows. The

following information details transactions and adjustments that occurred during 2015.

1. Sales total $145,850 in 2015; all sales were cash sales.

2. Inventory purchases total $76,200 in 2015; at December 31, 2015, inventory totals $14,500.

Assume all purchases were made on account.

3. Accounts payable totals $4,100 at December 31, 2015.

4. Annual store rent of $24,000 was paid on March 1, 2015, covering the next 12 months. The

balance in prepaid rent at December 31, 2014, was the balance remaining from the advance

rent payment in 2014.

5. Wages are paid every other week on Friday; during 2015, Fischer paid $12,500 cash for wag-

es. At December 31, 2015, Fischer owed employees unpaid and unrecorded wages of $350.

6. Depreciation on equipment totals $1,700 in 2015.

FISCHER CARD SHOP

Balance Sheet

December 31, 2014

Cash ........................ $ 8,500

Inventories ................... 12,000

Prepaid rent .................. 3,800

Total current assets ............ 24,300

Equipment ................... $7,500

Less accumulated depreciation ... 3,000

Equipment, net ................ 4,500

Total assets................... $28,800

Accounts payable..................... $ 5,200

Wages payable....................... 100

Total current liabilities.................. 5,300

Total equity (includes retained earnings) ... 23,500

Total liabilities and equity ............... $28,800

a. Prepare any necessary transaction entries for 2015 and adjusting entries at December 31,

2015, using the ?nancial statement effects template.

b. Prepare any necessary transaction entries for 2015 and adjusting entries at December 31,

2015, in journal entry form.

c. Set up T-accounts, enter the balances above, and post the transactions and adjusting entries to

them.

d. Prepare its income statement for 2015, and its balance sheet at December 31, 2015.

e. Prepare entries to close its temporary accounts in journal entry form and post the closing en-

tries to the T-accounts

Answer 1