Selected account balances from the December 31, 2015, trial balance of the Gracy Company are listed below:
Debit
Credit
Inventory, January 1, 2015$12,500
Purchases25,000
Salaries Expense5,000
Rent Expense3,250
General and Administrative Expenses2,500
Sales $61,000
Dividends Declared3,500
In addition, the following information is available:
·The cost of the ending inventory at December 31, 2015, is $7,500.·$890 of salaries have accrued as of December 31.·On March 30, Gracy purchased a 12-month insurance policy for $240. The purchase was debited to Prepaid Insurance.·On December 1, the company paid 2 months' rent in advance. The $1500 payment was debited to Rent Expense.·In December, a customer paid $1,000 in advance for merchandise that will be shipped by Gracy in 2016. The amount received was credited to Sales.·Gracy estimates its bad debts to be 1% of sales (after all adjustments).·The income tax rate is 30%.?
Gracy Company uses a periodic inventory system.
Required:
Using a general journal format, prepare the required adjusting entries.
What will be an ideal response?
| Inventory | 25,000 | |||
| Purchases | 25,000 | |||
| Cost of Goods Sold | 30,000 | |||
| Inventory | 30,000 | |||
| Salaries Expense | 890 | |||
| Salaries Payable | 890 | |||
| Insurance Expense | 180 | |||
| Prepaid Insurance (9/12 ´ $240) | 180 | |||
| Prepaid Rent | 750 | |||
| Rent Expense | 750 | |||
| Sales | 1,000 | |||
| Unearned Revenue | 1,000 | |||
| Bad Debts Expense | 600 | |||
| Allowance for Doubtful Accounts | ||||
| 0.01 ($61,000 - $1,000) | 600 | |||
| Income Tax Expense | 5,499 | |||
| Income Taxes Payable | 5,499 | |||
| 0.3 x $18, 330 = $5,499 | ||||
| $18,330 = ($61,000 - $12,500 - $25,000 + $7,500 - $5,000 - | ||||
| $3,250 - $2,500 - $890 - $180 + $750 - $1,000 - $600) | ||||
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