Adjusting and Closing Entries
Account balances taken from the ledger of Builders’ Supply Corporation on December 31,
2008, before adjustment, follow information relating to adjustments on December 31, 2008:
(a) Allowance for Bad Debts is to be increased to a balance of $3,000.
(b) Buildings are depreciated at the rate of 5% per year.
(c) Accrued selling expenses are $3,840.
(d) There are supplies of $780 on hand.
(e) Prepaid insurance relating to 2009 totals $720.
(f) Accrued interest on long term investments is $240.
(g) Accrued real estate and payroll taxes are $900.
(h) Accrued interest on the mortgage is $480.
(i) Income taxes are estimated to be 20% of the income before income taxes.
|
Cash |
$ 24,000 |
|
Accounts Receivable |
72,000 |
|
Allowance for Bad Debts |
1,380 |
|
Inventory |
87,570 |
|
Long Term Investments |
15,400 |
|
Land |
69,600 |
|
Buildings |
72,000 |
|
Accumulated Depreciation—Buildings |
19,800 |
|
Accounts Payable |
35,000 |
|
Mortgage Payable |
68,800 |
|
Capital Stock, $10 par |
180,000 |
|
Retained Earnings, December 31, 2007 |
14,840 |
|
Dividends |
13,400 |
|
Sales |
246,000 |
|
Sales Returns |
4,360 |
|
Sales Discounts |
5,400 |
|
Cost of Goods Sold |
114,370 |
|
Selling Expenses |
49,440 |
|
Office Expenses |
21,680 |
|
Insurance Expense |
1,440 |
|
Supplies Expense |
5,200 |
|
Taxes—Real Estate and Payroll |
7,980 |
|
Interest Revenue |
660 |
|
Interest Expense |
2,640 |
Instructions:
1. Prepare a trial balance.
2. Journalize the adjustments.
3. Journalize the closing entries.
4. Prepare a post closing trial balance.