Save Mart was a retail store. Its account balances on February 28 (the end of it

Question

Save Mart was a retail store. Its account balances on February 28 (the end of its fiscal year), before adjustments, were as shown below: The data for the adjustments are: 1. Cost of merchandise sold, $604,783. 2. Store equipment depreciation for the year, $7,097 3. Supplies inventory. February 28, $3,877 (Purchases of supplies during the year were debited to the Supplies Inventory account. 4. Expired insurance, $7,125. 5. The note payawe was at an interest rate of 9 percent, payable monthly. It had been outstanding throughout the year. 6. Sales salaries earned but not paid to employees, $2,340. 7. The statement sent by the bank, adjusted for checks outstanding, showed a balance of $88,110. The difference represented bank service charges. Required 1. Set up T accounts with the balances given above. 2. Journalize and post adjusting entries, adding other T accounts as necessary. 3. Journalize and post closing entries. 4. Prepare an income statement for the year and a balance sheet as of February 28.

Explanation / Answer

2. Journal Entries:

1. T-form Accounts :

Make other T-form accounts like this.

4. Income Statement :

Balance Sheet as of February 28

S.No. Accounts Titles and explanation Debit $ Credit $ 1 Cost of Goods sold 604783 Marchandise Inventory 604783 2 Depreciation 7097 Accumulated Depreciation - store equipemnt 7097 3 Supplies Inventory 3877 Supplies Inventory Account 3877 4 Insurance Expense 7125 Prepaid Insurance 7125 5 Interest Expense 865 Interest Payable 865 6 Salaries Expense 2340 Salaries Payable 2340 7 Bank Charges Expense 750 Cash 750

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