(Adjusting and Closing) Presented below is the December 31 trial balance of New York Boutique.
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NEW YORK BOUTIQUE |
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Debit |
Credit |
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Cash |
$18,500 |
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Accounts Receivable |
32,000 |
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Allowance for Doubtful Accounts |
$700 |
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Inventory, December 31 |
80,000 |
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Prepaid Insurance |
5,100 |
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Equipment |
84,000 |
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Accumulated Depreciation—Equipment |
35,000 |
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Notes Payable |
28,000 |
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Common Stock |
80,600 |
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Retained Earnings |
10,000 |
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Sales Revenue |
600,000 |
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Cost of Goods Sold |
408,000 |
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Salaries and Wages Expense (sales) |
50,000 |
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Advertising Expense |
6,700 |
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Salaries and Wages Expense (administrative) |
65,000 |
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Supplies Expense |
5,000 |
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$754,300 |
$754,300 |
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Instructions
(a) Construct T accounts and enter the balances shown.
(b) Prepare adjusting journal entries for the following and post to the T accounts. (Omit explanations.) Open additional T accounts as necessary. (The books are closed yearly on December 31.)
(1) Bad debt expense is estimated to be $1,400.
(2) Equipment is depreciated based on a 7 year life (no salvage value).
(3) Insurance expired during the year $2,550.
(4) Interest accrued on notes payable $3,360.
(5) Sales salaries and wages earned but not paid $2,400.
(6) Advertising paid in advance $700.
(7) Office supplies on hand $1,500, charged to Supplies Expense when purchased.
(c) Prepare closing entries and post to the accounts.