Question

The following list includes selected permanent accounts and all of the temporary accounts from the December 31, 2017, unadjusted trial balance of Emiko Co.. Emiko Co. uses a perpetual inventory system.

		Debit			Credit
Merchandise inventory	$	33,000
Prepaid selling expenses		6,200
Dividends		39,000
Sales				$	553,000
Sales returns and allowances		18,700
Sales discounts		5,600
Cost of goods sold		224,000
Sales salaries expense		54,000
Utilities expense		18,000
Selling expenses		39,000
Administrative expenses		111,000

Additional Information

Accrued sales salaries amount to $1,800. Prepaid selling expenses of $3,600 have expired. A physical count of year-end merchandise inventory shows $30,500 of goods still available.

(a) Use the above account balances along with the additional information, prepare the adjusting entries.
(b) Use the above account balances along with the additional information, prepare the closing entries.

Answer 1

a) Adjusting Entries (Amounts in $)

Date	General Journal	Debit	Credit
Dec 31	Sales Salaries Expense	1,800
	Salaries Payable		1,800
Dec 31	Selling Expenses	3,600
	Prepaid Selling Expenses		3,600
Dec 31	Cost of goods sold ($33,000 - $30,500)	2,500
	Merchandise Inventory		2,500

b)    Closing Entries (Amounts in $)

Date	General Journal	Debit	Credit
Dec 31	Sales	553,000
	Income Summary		553,000
Dec 31	Income Summary	478,200
	Sales returns and allowances		18,700
	Sales discounts		5,600
	Cost of goods sold (224,000+2,500)		226,500
	Sales Salaries Expense (54,000+1,800)		55,800
	Utilities expense		18,000
	Selling expenses (39,000+3,600)		42,600
	Administrative expenses		111,000
Dec 31	Income Summary (553,000 - 478,200)	74,800
	Emiko Capital		74,800