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., a business owned by Kumi Emiko. Emiko Co. uses a perpetual inventory system.

		Debit			Credit
Merchandise inventory	$	36,000
Prepaid selling expenses		6,800
K. Emiko, Withdrawals		45,000
Sales				$	577,000
Sales returns and allowances		19,900
Sales discounts		6,200
Cost of goods sold		236,000
Sales salaries expense		60,000
Utilities expense		21,000
Selling expenses		42,000
Administrative expenses		117,000

Additional Information

Accrued sales salaries amount to $2,400. Prepaid selling expenses of $2,100 have expired. A physical count of year-end merchandise inventory shows $32,300 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.

General Journal	Debit	Credit
Sales salaries expense	$2,400
Sales salaries payable		$2,400
Selling expense	$2,100
Prepaid selling expense		$2,100
Cost of goods sold ($36,000-32,300)	$3,700
Merchandise inventory		$3,700

b.

General Journal	Debit	Credit
Sales	$577,000
Income summary		$577,000
Income summary	$510,300
Sales return and allowances		$19,900
Sales discount		6,200
Cost of goods sold (236,000+3,700)		239,700
Sales salaries expenses (60,000+2,400)		62,400
Utilities expenses		21,000
Selling expenses (42,000+2,100)		44,100
Administrative expenses		117,000
Income summary ($577,000-510,300)	$66,700
Retained earnings		$66,700
Retained earnings	$45,000
K. Emiko, Withdrawals		$45,000