Question

Prepare in journal entry form all adjusting and correcting journal entries based on the following information.  All information was provided to you as of 12/31/2018.  (Round all numbers to the nearest dollar).

(m) After reviewing details of sales, you note that the sales taxes collected on the last week of December’s sales were included in sales revenue. Sales recorded the last week of December that included the sales tax of 1% amounted to $280,000.

(n) Czar uses the Dollar Value LIFO inventory method. For internal purposes, the Merchandise Inventory Account is maintained at FIFO (current costs). At the end of the year, the LIFO reserve account is adjusted so inventory on the balance sheet reflects Dollar Value LIFO. You need to calculate the proper inventory balance and adjust the LIFO reserve. The price index for this year is 1.20. For the year ended December 31, 2018 there is a debit balance of $340,000 for Merchandise Inventory. Prior year inventory records show the following calculation for 2018:

                   140,000 X 1.0  =    140,000

                      80,000 X 1.05 =    84,000

(o) All office equipment was purchased January 1, 2017. Czar uses the DDB method to depreciate office equipment. No office equipment has been added since the initial purchase. It is estimated that the office equipment has a useful life of 10 years with a salvage value of $9,600. There is a debit balance of $260,000 for Office Equipment on the balance sheet for the year ended December 31, 2018.

(p) On January 1, 2018, Czar rented a portion of one store to Pellston Inc. The contract was for 15 months and Czar required all of the cash up front. The rent is being earned equally each month. This is the only item in which rent is being earned by the company. There is a credit balance of $60,000 for Rent Revenue on the balance sheet for the year ended December 31, 2018.

Answer 1

Journal entries:
Date	Accounts Titles	Debit$	Credit$
31-Dec	Sales Revenue	280000
	Sales tax payable		280000
	(being 1% sales tax amounted to $280000
	made payable on Dec 31)
31-Dec	Lifo reserve account	40000
	Merchandise Inventory account		40000
	(140000 (1.20-1) + 80000 (1.20 - 1.05) = 40000
31-Dec	Depreciation expense	41600
	Acc. Dep. - equipment		41600
	(260000 - 260000*20%)*20% = 41600
31-Dec	Rent Revenue	12000
	Unearned rent revenue		12000
	[60000 - (60000*12/15) = 12000 ]