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Chapter 5: Q23E (page 302)

The adjusted trial balance of Quality Office Systems at March 31, 2018, follows:

Requirements

1. Journalize the required closing entries at March 31, 2018.

2. Set up T-accounts for Income Summary; Retained Earnings; and Dividends. Post the closing entries to the T-accounts, and calculate their ending balances.

3. How much was Quality Office鈥檚 net income or net loss?

Short Answer

Expert verified

The net income of the Quality Office was$83,750.

Step by step solution

01

Meaning of Trial Balance

In accounting, trial balance refers to a tabular formatted report that contains the balances of all the ledger accounts of both aspects, i.e., debit and credit. A trial balance facilitates the business entities to draft their annualfinancial statements.

02

Preparation of closing entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Mar 31

Sales revenue

235,700

Income summary

235,700

(To close the revenue account)

Mar 31

Income summary

151,950

Cost of goods sold

107,550

Selling expense

27,400

Administrative expense

14,200

Interest expense

2,800

(To close the expense accounts)

Mar 31

Income summary (235700-151950)

83,750

Retained earnings

83,750

(To close the income summary account)

Mar 31

Retained earnings

41,500

Dividends

41,500

(To adjust the dividends)

03

Preparation of T-accounts

Income Summary

Date

Particulars

Amount ($)

Date

Particulars

Amount ($)

2018

2018

Mar 31

Expenses

151,950

Mar 31

Sales revenue

235,700

Retained earnings

83,750

Mar 31

Ending balance

0

Retained Earnings

Date

Particulars

Amount ($)

Date

Particulars

Amount ($)

2018

2018

Mar 31

Dividends

41,500

Mar 31

Opening balance

4,950

Mar 31

Income summary

83,750

Mar 31

Ending balance

47,200

Dividends

Date

Particulars

Amount ($)

Date

Particulars

Amount ($)

2018

2018

Mar 31

Opening balance

41,500

Mar 31

Retained earnings

41,500

Mar 31

Ending balance

0

04

Computation of net income or net loss

Net Income=Revenues-Expenses=$235,700-$151,950=$83,750

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Most popular questions from this chapter

Consider the following transactions for Toys and More:

May 8 Toys and More buys \(113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60.

12 Toys and More returns \)11,250 of the merchandise to MegoBlock due to damage during shipment.

15 Toys and More paid the amount due, less the return and discount.

Requirements

1. Journalize the purchase transactions. Explanations are not required.

2. In the final analysis, how much did the inventory cost Toys and More?

What financial statement is merchandise inventory reported on, and in what section?

Camilia Communications reported the following figures from its adjusted trial balance for its first year of business, which ended on July 31, 2018:

Cash \( 2,900 Cost of Goods Sold \) 18,700

Selling Expenses 1,400 Equipment, net 9,500

Accounts Payable 4,300 Accrued Liabilities 1,800

Common Stock 4,365 Net Sales Revenue 29,200

Notes Payable, long-term 500 Accounts Receivable 3,200

Merchandise Inventory 1,100 Interest Expense 65

Administrative Expenses 3,300

Prepare Camilia Communication鈥檚 multi-step income statement for the year ended July 31, 2018.

Match the accounting terms with the corresponding definitions.

1. Credit Terms a. The cost of the merchandise inventory that the business has sold to customers.

2. FOB Destination b. An amount granted to the purchaser as an incentive to keep goods that are not 鈥渁s ordered.鈥�

3. Invoice c. A type of merchandiser that buys merchandise either from a manufacturer or a wholesaler and then sells those goods to consumers.

4. Cost of Goods Sold d. A situation in which the buyer takes ownership (title) at the delivery destination point.

5. Purchase Allowance e. A type of merchandiser that buys goods from manufacturers and then sells them to retailers.

6. FOB Shipping Point f. A discount that businesses offer to purchasers as an incentive for early payment.

7. Wholesaler g. A situation in which the buyer takes title to the goods after the goods leave the seller鈥檚 place of business.

8. Purchase Discount h. The terms of purchase or sale as stated on the invoice.

9. Retailer i. A seller鈥檚 request for cash from the purchaser.

Comparing periodic and perpetual inventory systems

For each statement below, identify whether the statement applies to the periodic inventory system, the perpetual inventory system, or both.

a. Normally used for relatively inexpensive goods.

b. Keeps a running computerized record of merchandise inventory.

c. Achieves better control over merchandise inventory.

d. Requires a physical count of inventory to determine the quantities on hand.

e. Uses bar codes to keep up-to-the-minute records of inventory.
See all solutions

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