Example Three: Use a Trial Balance to: Calculate Gross Profit (Gross Margin), Cu
ID: 2529592 • Letter: E
Question
Example Three:
Use a Trial Balance to:
Calculate Gross Profit (Gross Margin), Current Assets, Long-Term Assets (PPE), Current Liabilities, and Long-Term Liabilities
Prepare Closing Entries, and
Calculate ending balance in Retained Earnings.
Account Name
Debit
Credit
Cash
143,500
Accounts Receivable
23,250
Allowance for Uncollectible Accounts
465
Inventory
20,750
Prepaid Rent
3,000
Equipment
30,000
Accumulated Depreciation – Equipment
2,300
Accounts Payable
5,000
Salaries Payable
900
Unearned Revenue
3,500
Notes Payable
45,000
Common Stock
150,000
Retained Earnings
10,250
Dividends
1,500
Sales Revenue
133,250
Cost of Goods Sold
69,000
Operating Expenses
20,000
Salaries Expense
30,900
Depreciation Expense
2,300
Rent Expense
6,000
Bad Debt Expense
465
Totals
350,665
350,665
Calculate
gross profit (gross margin) ________________
total current assets __________________
total long-term (PPE) assets ________________
total current liabilities ________________
total long-term liabilities ________________
Prepare the Closing Entries.
Date
Account Name
Debit
Credit
Calculate the ending balance of retained earnings_________________________.
Retained Earnings
Account Name
Debit
Credit
Cash
143,500
Accounts Receivable
23,250
Allowance for Uncollectible Accounts
465
Inventory
20,750
Prepaid Rent
3,000
Equipment
30,000
Accumulated Depreciation – Equipment
2,300
Accounts Payable
5,000
Salaries Payable
900
Unearned Revenue
3,500
Notes Payable
45,000
Common Stock
150,000
Retained Earnings
10,250
Dividends
1,500
Sales Revenue
133,250
Cost of Goods Sold
69,000
Operating Expenses
20,000
Salaries Expense
30,900
Depreciation Expense
2,300
Rent Expense
6,000
Bad Debt Expense
465
Totals
350,665
350,665
Explanation / Answer
1. gross profit (gross margin) = gross margin / sales
=[ sale - cost of goods sold] / sales
= 64250 / 133,250
= 48.22%
total current assets =143,500 + [23,250 - 465] + 20,750 + 3,000
= 190035
total long-term (PPE) assets = [30000 - 2300] = $27700
total current liabilities = 5,000 + 900 + 3,500
= 9400
total long-term liabilities = 45,000
2.
3. Beginning balance of retained earnings = 10,250
Add: net income = 4585
less: dividend = (1500)
ending balance of retained earnings = $13335
Date Accounts title Dr Cr 31 Dec sales revenue 133,250 To income summary 133,250 31 Dec Income summary 128665 To Cost of Goods Sold 69,000 To Operating Expenses 20000 To Salaries Expense 30900 To Depreciation Expense 2300 To Rent Expense 6000 To Bad Debt Expense 465 31 Dec Income summary 4585 To retained earnings 4585 31 Dec Retained earnings 1,500 To Dividend 1,500Related Questions
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