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.

Exercise 4-10 Preparing adjusting and closing entries for a merchandiser LO P3

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     $     30,500                
Prepaid selling expenses           5,700                
Dividends           34,000                
Sales                       $     533,000
Sales returns and allowances           17,700                
Sales discounts           5,100                
Cost of goods sold           214,000                
Sales salaries expense           49,000                
Utilities expense           15,500                
Selling expenses           36,500                
Administrative expenses           106,000                


Additional Information

Accrued sales salaries amount to $1,300. Prepaid selling expenses of $3,100 have expired. A physical count of year-end merchandise inventory shows $29,000 of goods still available.

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




Explanation
(a)
Adjusting entry:
Inventory shrinkage = ($30,500 – $29,000) = $1,500.

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




Explanation
(b)

Closing entries:
Cost of goods sold = ($214,000 + $1,500) = $215,500.
Sales salaries expense = ($49,000 + $1,300) = $50,300.
Selling expenses = ($36,500 + $3,100) = $39,600.


Thank you!