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13 November, 18:18

Juan Morales Company had the following account balances at year-end: Cost of Goods Sold $60,430; Inventory $14,340; Operating Expenses $29,560; Sales Revenue $124,430; Sales Discounts $1,120; and Sales Returns and Allowances $1,830. A physical count of inventory determines that merchandise inventory on hand is $13,050.

Prepare the adjusting entry necessary as a result of the physical count.

1. Account Titles and Explanation

Debit Credit

2. Account Tiles and Explanation

Debit Credit

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Answers (1)
  1. 13 November, 20:07
    0
    The adjusting entry for physical count is shown below:

    Cost of goods sold A/c Dr $1,290

    To Inventory A/c $1,290

    (Being the adjusting entry for physical count is recorded)

    The computation is given below:

    = Year end balance of inventory account - physical inventory on hand

    = $14,340 - $13,050

    = $1,290

    The closing entries for the following accounts are shown below:

    1. Sales Revenue A/c Dr $124,430

    To Income Summary $124,430

    (Being revenue account closed)

    2. Income summary A/c Dr $94,230

    To Cost of goods sold $61,720 ($60,430 + $1,290)

    To Sales Discounts $1,120

    To Operating Expenses $29,560

    To Sales Returns and Allowances $1,830

    (Being expenses accounts are closed)

    3. Income summary A/c Dr $30,200 ($124,430 - $94,230)

    To Retained earning $30,200

    (Being the difference is credited to retained earning)
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