The inventory account of Olympic Sports Wear is as follows. Merchandise inventor

Question

The inventory account of Olympic Sports Wear is as follows.

Merchandise inventory account balance $75,000
Physical inventory $71,500

Instruction:
Prepare the adjustment journal entry.

Part 2 (6 points):
The information relating to the inventory of Olympic Sports Wear is as follows:

Merchandise inventory accounts balance $75,000
Physical inventory $98,200

Instruction:
Prepare the adjustment journal entry.

Part 3 (6 points):
Olympic Sports Wear furnishes the following information:

On January 1, 2006, the supplies account has $7,200 balance
During the year, supplies are purchased for $5,000
On December 31, 2005, the supplies account has a closing balance of $2,200.

Instruction:
Prepare the adjusting journal entry.

Part 4 (6 points):
Olympic Sports Wear furnishes the following information:

An insurance policy is purchased on December 1, 2005 for three months (December through February). The premium amount for the quarterly period is $1,500.
The clerk debited the Prepaid Insurance account for $1500.
At the end of the account year (on March 31, 2006), only one month cost $500 has expired. The value of the unexpired insurance is $1,000.

Instruction:
Prepare the adjusting journal entries for the Prepaid Insurance Account.

Part 5 (6 points):
Olympic Sports Wear estimates its Annual Federal Income tax as $10,000. It has paid the tax in four installments of $2,500 each. However, at the end of the year, the actual tax amount is $11,200.

Therefore, the company needs to pay $1,200 to the government.

Instruction:
Prepare the adjusting journal entry.

Explanation / Answer

Merchandise inventory account balance = $75,000 + $75,000 + $7,200 =$157200 Physical inventory = $71,500 + $98,200 =$169700 Balance in supplies account= $7,200 Supplies account has a closing balance= $7,200-$5,000 =$2,200. Prepaid Insurance account for $1500= $500+$1000 Olympic Sports Wear estimates its Annual Federal Income tax = $10,000+$1200 = $11,200 Company needs to pay to the government= $11,200- $10,000 =$1,200

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