ACCT 201 Principles of Financial Accounting Practice Exam - Chapter 4 Reporting & Analyzing Merchandising Activities Dr. Fred Barbee Solution to Short-Problem #1

Short Problem #1

Following is the year-end adjusted trial balance for XYZ, Inc. for the current year.

XYZ, Inc. Adjusted Trial Balance December 31, 2002
Cash	$47,500
Accounts Receivable	46,000
Merchandise Inventory	50,000
Office Supplies	800
Accounts Payable		$16,000
Salaries Payable		850
Common Stock		89,000
Retained Earnings		11,630
Sales		500,000
Sales Returns andAllowances	4,500
Sales Discounts	4,250
Cost of Goods Sold	382,450
Sales Salaries Expense	44,000
Advertising Expense	8,150
Office Salaries Expense	24,325
OfficeSupplies Expense	450
InterestExpense	5,055
Totals	$617,480	$617,480

Required:

Prepare the closing entries at December 31 for the current year.

Solution

     Close the Revenue Accounts

Sales	500,000
Income Summary		500,000

     Close the Expense Accounts

Income Summary	473,180
Sales Returns and Allowances		4,500
Sales Discounts		4,250
Cost of Goods Sold		382,450
Sales Salaries Expense		44,000
Advertising Expense		8,150
Office Salaries Expense		24,325
Office Supplies Expense		450
Interest Expense		5,055

     Close the Income Summary Account

Income Summary	26,820
Retained Earnings		26,820

     Close the Dividends Account

       There were no dividends.