Question

Problem 13.4A. Obtain all data that is necessary from the worksheet prepared for Healthy Eating Foods Company in Problem 12.5A at the end of Chapter 12 (SHOWN BELOW). Then follow the instructions to complete this problem.

Instructions:

1. Record adjusting entries in the general journal as of December 31, 2016. Include descriptions.
2. Record closing entries in the general journal as of December 31, 2016. Include descriptions.
3. Record reversing entries in the general journal as of January 1, 2017. Include descriptions.

Analyze: Assuming that the firm did not record a reversing entry for salaries payable, what entry is required when salaries of $6,000 are paid on January 3?

ANSWER TO PROBLEM 12.5A BELOW:

Healthy Eating Foods Company Worksheet For the year ended December 31, 2016
Accounts	Trial Balance		Adjustments		Adjusted Trial Balance		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	30,100				30,100				30,100
Accounts Receivable	35,200				35,200				35,200
Allowance for Doubtful Accounts		420		2,800 (c)		3,220				3,220
Merchandise Inventory	86,000				86,000		86,000	78,000 (a)	78,000
Supplies	10,400			9,220 (d)	1,180				1,180
Prepaid Insurance	5,400			3,600 (e)	1,800				1,800
Office Equipment	8,300				8,300				8,300
Accumulated Depreciation: Office Equipment		2,650		1,325 (f)		3,975				3,975
Warehouse Equipment	28,000				28,000				28,000
Accumulated Depreciation: Warehouse Equipment		9,600		4,800 (g)		14,400				14,400
Notes Payable: Bank		32,000				32,000				32,000
Accounts Payable		12,200				12,200				12,200
Interest Payable		0		640 (h)		640				640
Social Security Tax Payable		1,680		310 (j)		1,990				1,990
Medicare Tax Payable		388		72.5 (j)		460.5				460.5
Federal Unemployment Tax Payable		0		30 (k)		30				30
State Unemployment Tax Payable		0		270		270 (k )				270
Salaries Payable		0		5,000		5,000(i)				5,000
Phillip Tucker, Capital		108,684				108,684				108,394.5
Phillip Tucker, Drawing	56,000				56,000				0
Sales		653,778				653,778		653,778
Sales Returns and Allowances	10,000				10,000		10,000
Purchases	350,000				350,000		350,000
Purchase Returns and Allowances		9,200				9,200		9,200
Income Summary
Rent Expense	36,000				36,000		36,000
Telephone Expense	2,200				2,200		2,200
Salary Expense	160,000		5,000 ( i)		165,000		165,000
Payroll Tax Expense	13,000		682.5 (j-k)		13,682.5		13,682.5
Supplies Expense	0		9,220 (d)		9,220		9,220
Insurance Expense	0		3,600 (e)		3,600		3,600
Depreciation Expense: Office Equipment	0		1,325 (f)		1,325		1,325
Depreciation Expense: Warehouse Equipment	0		4,800 (g)		4,800		4,800
Uncollectible Accounts Expense	0		2,800 (c)		2,800		2,800
Interest Expense	0		640 (h)		640		640
Totals			28,067.5	28,067.5			685,267.50	740,978	182,580	182,580

Answer 1

1. In the books of Healthy Eating Foods Company:

Addjusting entries:

Date	General Journal	Debit	Credit
December 31, 2016		$	$
a-b.	Merchandise Inventory ( Closing )	78,000
	Cost of Goods Sold	348,800
	Purchase Returns	9,200
	Purchases		350,000
	Merchandise Inventory ( Beginning )		86,000
	To record cost of goods sold and merchandise inventory
c.	Bad Debt Expense	2,800
	Allowance for Doubtful Accounts		2,800
d.	Supplies Expense	9,220
	Supplies		9,220
e.	Insurance Expense	3,600
	Prepaid Insurance		3,600
f.	Depreciation Expense: Office Equipment	1,325
	Accumulated Depreciation : Office Equipment		1,325
g.	Depreciation Expense: Warehouse Equipment	4,800
	Accumulated Depreciation: Warehouse Equipment		4,800
h.	Interest Expense	640
	Interest Payable		640
i.	Salaries Expense	5,000
	Salaries Payable		5,000
j.	Payroll Tax Expense	382.5
	Social Security Tax Payable		310
	Medicare Tax Payable		72.5
k.	Payroll Tax Expense	300
	Federal Unemployment Tax Payable		30
	State Unemployment Tax Payable		270

2. Closing entries:

Date	General Journal	Debit	Credit
Dec 31, 2016		$	$
a.	Sales	653,778
	Income Summary		653,778
	To close revenue account
b.	Income Summary	598,067.5
	Sales Returns and Allowances		10,000
	Cost of Goods Sold		348,800
	Salaries Expense		165,000
	Rent Expense		36,000
	Telephone Expense		2,200
	Supplies Expense		9,220
	Insurance Expense		3,600
	Payroll Tax Expense		13,682.5
	Depreciation Expense: Office Equipment		1,325
	Depreciation Expense: Warehouse Equipment		4,800
	Uncollectible Accounts Expense		2,800
	Interest Expense		640
	To close expense accounts
c.	Income Summary	55,710.5
	Phillip Tucker, Capital		55,710.5
	To close income summary
d.	Phillip Tucker, Capital	56,000
	Phillip Tucker, Drawing		56,000
	To close drawings account