SUMMARY INFORMATION BACKGROUND: Ruby\'s Jewelry was incorporated on January 1, 2
ID: 2413077 • Letter: S
Question
SUMMARY INFORMATION BACKGROUND: Ruby's Jewelry was incorporated on January 1, 2010 with 20,000 shares of $1 par value common stock authorized. All 20,000 shares have been issued. The company's accounting period ends on December 31 of each year ACCOUNTING POLICIES: The company uses the following generally accepted accounting principles in presenting financial information: 1. 2. 3. INVENTORY VALUATION- First-in, first-out method on a perpetual basis. Physical counts are conducted at the end of the year to determine the quantity and value of merchandise inventory on hand. DEPRECIATION- Straight-line. a. b. As of the close of business on November 30, 2017, the company had the following trial balance: Ruby's Jewelry Post-Closing Trial Balance As of November 30, 2017 Acct Account Title Credit Debit $ 360,000 $ 294,270 S 640,500 S 760,000 1110 Cash 1120 Accounts Receivable 1130 Merchandise Inventory 1230 Equipment 1231 Accumulated Depreciation- Equipment 2110 Accounts Payable 2210 Income Tax Payable 3010 Common Stock ($1 Par) 3020 Paid-In Capital in Excess of Par 3030 Income Summary 3040 Retained Earnings 4010 Sales Revenue 5020 Cost of Goods Sold 6010 Salaries & Wages Expense 6060 Telephone& Utility Expense 6070 Rent Expense 6120 Depreciation Expense- Equipment 6410 Income Tax Expense 239,400 432,000 20,000 $ 899,750 S 60,250 $ 5,053,000 $ 2,765,650 $ 1.502,480 169,000 $ 212,500 Total S 6,704,400 S 6,704.400Explanation / Answer
Following journal entries are required to be recorded:
To Merchandise Inventory (1130) A/c 190,000
(Being cost of goods sold adjusted with merchandise inventory.)
2. Accounts Receivable A/c (1120) Dr. 401,500
To Sales Revenue A/c (4010)401,500
(Being sales made.)
3. Cost of Goods Sold (5020) Dr. 190,000
To Merchandise Inventory (1130) A/c 190,000
(Being cost of goods sold adjusted with merchandise inventory.)
4. Cash A/c (1110) Dr. 350,000
To Accounts Receivable A/c (1120)350,000
(Being payment received from customer.)
5. Accounts Payable (2110) Dr. 260,000
To Cash (1110) A/c 260,000
(Being payment made to supplier.)
6. Telephone and Utility Expenses (6060) A/c Dr. 7,500
To Cash (1110) A/c7,500
(Being telephone and utility expenses paid.)
7. Salaries & Wages Expenses (6010) A/c Dr. 132,000
To Cash (1110) A/c132,000
(Being salaries and wages cheques written and distributed.)
8. Rent Expenses (6070) A/c Dr. 11,000
To Cash (1110) A/c11,000
(Being rent paid in cash.)
9. Depreciation Expense – Equipment (6120) Dr. 34,200
To Accumulated Depreciation – Equipment (1231) A/c 34,200
(Being depreciation charged calculated as per working note 1.)
Working Note 1:
Original Cost of Equipment = 760,000
Residual Value = 10%*760,000 = 76,000
Estimated useful life = 20 years
Depreciation on Straight Line Basis = (760,000-76,000)/20 = 34,200 per year
10. Income Tax Expenses (6410) Dr. 148,000
To Income Tax Payable (2210) A/c148,000
(Being estimated income tax payable for the year.)
11. Cost of Goods Sold (5020) Dr. 5,000
To Merchandise Inventory (1130) A/c 5,000
(Being cost of goods sold adjusted with merchandise inventory due to shortage of physical stock as per working note 2.)
Working Note 2:
Opening balance of Merchandise Stock = 640,500
Purchases made during the month = 200,500
Cost of Sales for the month = 190,000
Closing Stock of Merchandise Stock as per books = 640,500 + 200,500 – 190,000 = 651,000
Closing Stock as per Physical count at the end of month = 646,000
Loss to be written off = 5,000
Trial Balance after the above entries will be as follows:
Acct. # Account Title Debit Credit 1110 Cash 299,500 1120 Accounts Receivable 345,770 1130 Merchandise Inventory 646,000 1230 Equipment 760,000 1231 Accumulated Depreciation - Equipment 273,600 2110 Accounts Payable 372,500 2210 Income Tax Payable 148,000 3010 Common Stock ($1 Par) 20,000 3020 Paid-in Capital in Excess of Par 899,750 3030 Income Summary 3040 Retained Earnings 60,250 4010 Sales Revenue 5,454,500 5020 Cost of Goods Sold 2,960,650 6010 Salaries & Wages Expense 1,634,480 6060 Telephone & Utility Expense 176,500 6070 Rent Expense 223,500 6120 Depreciation Expense - Equipment 34,200 6410 Income Tax Expense 148,000 7,228,600 7,228,600Related Questions
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