Q10P Presented below is the December ... [FREE SOLUTION]

Chapter 13: Q10P (page 658)

Presented below is the December 31 trial balance of New York Boutique.
NEW YORK BOUTIQUE
TRIAL BALANCE
DECEMBER 31

Debit
Credit
Cash
$ 18,500
Accounts Receivable
32,000
Allowance for Doubtful Accounts
$ 700
Inventory, December 31
80,000
Prepaid Insurance
5,100
Equipment
84,000
Accumulated Depreciation鈥擡quipment
35,000
Notes Payable
28,000
Common Stock
80,600
Retained Earnings
10,000
Sales Revenue
600,000
Cost of Goods Sold
408,000
Salaries and Wages Expense (sales)
50,000
Advertising Expense
6,700
Salaries and Wages Expense (administrative)
65,000
Supplies Expense
5,000

$754,300
$754,300
Instructions
a. Construct T-accounts and enter the balances shown.
b. Prepare adjusting journal entries for the following and post to the T-accounts. (Omit explanations.) Open additional T-accounts as necessary. (The books are closed yearly on December 31.)
Bad debt expense is estimated to be $1,400.
Equipment is depreciated based on a 7-year life (no salvage value).
Insurance expired during the year $2,550.
Interest accrued on notes payable $3,360.
Sales salaries and wages earned but not paid $2,400.
Advertising paid in advance $700.
Office supplies on hand $1,500, charged to Supplies Expense when purchased. c.Prepare closing entries and post to the accounts.

Short Answer

Expert verified

The T-accounts are prepared in Step 2.
Adjusting journal entries are shown in Step 3, and its posting is shown in Step 4.
Closing entries and their posting are shown in Step 4.

Step by step solution

Meaning of Trial Balance

Aworksheetused in bookkeeping is the trial balance.Each ledger accounts balance is written in trial balanceto form aggregates for the credit and debit account columns that are always equal

(a) Preparing T-accounts

Dr.	Cash	Cr.
Balance	$18,500

Dr.	Allowance for Doubtful Accounts		Cr.
		Balance	$700

Dr.	Prepaid Insurance	Cr.
Balance	$5,100

Dr.	Accumulated Depreciation-Equipment		Cr.
		Balance	$35,000

Dr.	Common Stock		Cr .
		Balance	$80,600

Dr.	Sales Revenue		Cr.
		Balance	$600,000

Dr.	Salaries and Wages Expense (Sales)	Cr.
Balance	$50,000

Dr.	Salaries and Wages Expense (Administrative)	Cr.
Balance	$65,000

Dr.	Account Receivable	Cr.
Balance	$32,000

Dr.	Inventory	Cr.
Balance	$80,000

Dr.	Equipment	Cr.
Balance	$84,000

Dr.	Notes Payable		Cr.
		Balance	$28,000

Dr.	Retained Earnings		Cr.
		Balance	$10,000

Dr.	Cost of Goods Sold	Cr.
Balance	$408,000

Dr.	Advertising expense	Cr.
Balance	$6,700

Dr.	Supplies Expense	Cr.
Balance	$5,000

(b) Preparing journal entries

Date	Particulars	Debit ($)	Credit ($)
1	Bad debt expense	1,400
	Allowance for doubtful accounts		1,400

2	Depreciation expense-Furniture and Equipment	12,000
	Accumulated depreciation-Furniture and equipment		12,000

3	Insurance expense	2,550
	Prepaid insurance		2,550

4	Interest expense	3,360
	Interest payable		3,360

5	Sales salaries expense	2,400
	Salaries payable		2,400

6	Prepaid advertising expense	700
	Advertising expense		700

7	Office Supplies	1,500
	Office expense		1,500

(c) Preparing closing entries and post to the accounts

Date	Particulars	Debit ($)	Credit ($)
Dec. 31	Sales	$600,000
	Income Summary		$600,000

Dec. 31	Income Summary	554,210
	Cost of goods sold		408,000
	Advertising expense		6,000
	Administrative salaries expense		65,000
	Sales salaries expense		52,400
	Office expense		3,500
	Insurance expense		2,500
	Bad debt expense		1,400
	Depreciation expense-Furniture and equipment		12,000
	Interest expense		3,360

Dec.31	Income Summary	45,790
	Retained earnings		45,790

Preparing T-accounts (b and c)

Dr.	Cash	Cr.
Balance	$18,500

Dr.	Inventory	Cr.
Balance	$80,000

Dr.	Prepaid Insurance		Cr.
Balance	$5,100	Adj.	2,550
	2,550

Dr.	Share Capital-Ordinary		Cr.
		Balance	$80,600

Dr.	Salaries and Wages Expense (Sales)		Cr.
Balance	$50,000	Cls.	52,400
Adj.	2,400
	$52,400		$52,400

Dr.	Bad debt Expense		Cr.
Adj.	1,400	Cls.	1,400

Dr.	Interest Payable		Cr.
		Adj.	$3,360

Dr.	Office Supplies	Cr.
Adj.	1,500

Dr.	Retained Earnings		Cr.
		Balance	$10,000
		Inc.	45,790
		Bal.	55.790

Dr.	Account Receivable	Cr.
Balance	$32,000

Dr.	Furniture and Equipment	Cr.
Balance	$84,000

Dr.	Notes Payable		Cr
		Balance	$28,000

Dr.	Sales		Cr.
Cls.	$600,000	Balance	$600,000

Dr.	Advertising expense		Cr.
Balance	$6,700	Adj.	700
		Cls.	6,000
			6,700

Dr.	Office expense		Cr.
Balance	$5,000	Adj.	1,500
		Cls.	3,500
	$5,000		$5,000

Dr.	Depreciation Expense-Furniture and Equipment		Cr.
Adj.	12,000	Cls.	12,000

Dr	Salaries Payable		Cr.
		Adj.	$2,400

Dr.	Cost of Goods Sold		Cr.
Balance	$408,000	Cls.	408,000

Dr.	Allowance for Doubtful Accounts		Cr.
		Balance	700
		Inc.	1,400
			2,100

Dr.	Accumulated Depreciation-Furniture and Equipment		Cr.
		Balance	$35,000
		Adj.	12,000
			47,000

Dr.	Salaries and Wages Expense (Administrative)		Cr.
Balance	$65,000	Cls.	65,000

Dr.	Insurance expense		Cr.
Adj.	2,550	Cls.	2,550

Dr.	Interest Expense		Cr
Adj.	3,360	Cls.	3,360

Dr.	Prepaid Advertising	Cr.
Adj.	700

Dr.	ncome Summary		Cr.
Exp.	554,210	Sales	600,000
Inc.	45,790
	600,000		600,000

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Short Answer

Step by step solution

Meaning of Trial Balance

(a) Preparing T-accounts

(b) Preparing journal entries

(c) Preparing closing entries and post to the accounts

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NEW YORK BOUTIQUE TRIAL BALANCE DECEMBER 31
	Debit	Credit
Cash	\( 18,500
Accounts Receivable	32,000
Allowance for Doubtful Accounts		\) 700
Inventory, December 31	80,000
Prepaid Insurance	5,100
Equipment	84,000
Accumulated Depreciation鈥擡quipment		35,000
Notes Payable		28,000
Common Stock		80,600
Retained Earnings		10,000
Sales Revenue		600,000
Cost of Goods Sold	408,000
Salaries and Wages Expense (sales)	50,000
Advertising Expense	6,700
Salaries and Wages Expense (administrative)	65,000
Supplies Expense	5,000
	\(754,300	\)754,300