Question

Problem 3-4

The trial balance of Blossom Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year.

BLOSSOM FASHION CENTER TRIAL BALANCE NOVEMBER 30, 2017
		Debit			Credit
Cash		$33,770
Accounts Receivable		37,390
Inventory		48,690
Supplies		9,190
Equipment		140,380
Accumulated Depreciation-Equipment					$26,760
Notes Payable					54,690
Accounts Payable					52,190
Common Stock					93,690
Retained Earnings					11,690
Sales Revenue					765,960
Sales Returns and Allowances		4,200
Cost of Goods Sold		495,400
Salaries and Wages Expense		138,080
Advertising Expense		27,780
Utilities Expenses		15,920
Maintenance and Repairs Expense		12,100
Delivery Expense		16,700
Rent Expense		25,380
Totals		$1,004,980			$1,004,980

Adjustment data:

1.		Supplies on hand totaled $5,190.
2.		Depreciation is $17,070 on the equipment.
3.		Interest of $10,440 is accrued on notes payable at November 30.

Other data:

1.		Salaries expense is 70% selling and 30% administrative.
2.		Rent expense and utilities expenses are 80% selling and 20% administrative.
3.		$30,000 of notes payable are due for payment next year.
4.		Maintenance and repairs expense is 100% administrative

1- Journalize the closing entries

2-Prepare a post-closing trial balance.

Answer 1

• All working forms part of the answer
• For closing entries, we need to have adjusted balance and figure of Net Income (Loss)
• Step 1: Calculation of adjusted balances:

	Unadjusted Trial balance		Adjustments		Adjusted Trial balance
NOVEMBER 30, 2017	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$                                   33,770.00				$           33,770.00
Accounts Receivable	$                                   37,390.00				$           37,390.00
Inventory	$                                   48,690.00				$           48,690.00
Supplies	$                                     9,190.00			$           4,000.00	$             5,190.00
Equipment	$                                 140,380.00				$        140,380.00
Accumulated Depreciation-Equipment		$                  26,760.00		$         17,070.00		$        43,830.00
Notes Payable		$                  54,690.00				$        54,690.00
Interest Payable				$         10,440.00		$        10,440.00
Accounts Payable		$                  52,190.00				$        52,190.00
Common Stock		$                  93,690.00				$        93,690.00
Retained Earnings		$                  11,690.00				$        11,690.00
Sales Revenue		$                765,960.00				$      765,960.00
Sales Returns and Allowances	$                                     4,200.00				$             4,200.00
Cost of Goods Sold	$                                 495,400.00				$        495,400.00
Salaries and Wages Expense	$                                 138,080.00				$        138,080.00
Advertising Expense	$                                   27,780.00				$           27,780.00
Utilities Expenses	$                                   15,920.00				$           15,920.00
Maintenance and Repairs Expense	$                                   12,100.00				$           12,100.00
Delivery Expense	$                                   16,700.00				$           16,700.00
Depreciation Expense - Equipment			$                                     17,070.00		$           17,070.00
Interest Expense			$                                     10,440.00		$           10,440.00
Supplies expense			$                                        4,000.00		$             4,000.00
Rent Expense	$                                   25,380.00				$           25,380.00
Totals	$                             1,004,980.00	$            1,004,980.00	$                                     31,510.00	$         31,510.00	$     1,032,490.00	$ 1,032,490.00

• Step 2: Calculation of Net Income (Loss)

Calculation of Net Income (Loss)
Sales Revenue	$           765,960.00
Sales Returns and Allowances	$              (4,200.00)
Net Sales		$   761,760.00
Cost of Goods Sold		$   495,400.00
Gross Profits		$   266,360.00
Operating & Ither expenses:
Salaries and Wages Expense	$           138,080.00
Advertising Expense	$              27,780.00
Utilities Expenses	$              15,920.00
Maintenance and Repairs Expense	$              12,100.00
Delivery Expense	$              16,700.00
Depreciation Expense - Equipment	$              17,070.00
Interest Expense	$              10,440.00
Supplies expense	$                4,000.00
Rent Expense	$              25,380.00
Total expenses		$   267,470.00
Net Income (Loss)		$     (1,110.00)

• Requirement 1: Closing Entries

Closing entry no.	Accounts title	Debit	Credit
(a)	Sales Revenue	$ 765,960.00
	Income Summary		$ 765,960.00
	(Revenues account with credit balance, closed)
(b)	Income Summary	$ 767,070.00
	Sales Returns and Allowances		$      4,200.00
	Cost of Goods Sold		$ 495,400.00
	Salaries and Wages Expense		$ 138,080.00
	Advertising Expense		$    27,780.00
	Utilities Expenses		$    15,920.00
	Maintenance and Repairs Expense		$    12,100.00
	Delivery Expense		$    16,700.00
	Depreciation Expense - Equipment		$    17,070.00
	Interest Expense		$    10,440.00
	Supplies expense		$      4,000.00
	Rent Expense		$    25,380.00
	(Expense accounts and other debit balance account closed)
(c )	Retained Earnings	$      1,110.00
	Income Summary		$      1,110.00
	(Net Loss balance of Income Summary closed)

• Requirement 2: Post Closing Trial balance

	Post Closing Trial balance
NOVEMBER 30, 2017	Debit	Credit
Cash	$           33,770.00
Accounts Receivable	$           37,390.00
Inventory	$           48,690.00
Supplies	$             5,190.00
Equipment	$        140,380.00
Accumulated Depreciation-Equipment		$        43,830.00
Notes Payable		$        54,690.00
Interest Payable		$        10,440.00
Accounts Payable		$        52,190.00
Common Stock		$        93,690.00
Retained Earnings		$        10,580.00
Totals	$        265,420.00	$      265,420.00