Please answer the question below: Preparing Adjusting Entries, Financial Stateme
ID: 2343151 • Letter: P
Question
Please answer the question below:
Preparing Adjusting Entries, Financial Statements, and Closing Entries Fischer Card Shop is a small retail shop. Fischer's balance sheet at year-end 2014 is as follows. The following information details transactions and adjustments that occurred during 2015. 1. Sales total $145,850 in 2015; all sales were cash sales 2. Inventory purchases total $76,200 in 2015; at December 31, 2015, inventory totals 14,500. Assume all purchases are made on account. . Accounts payable totals $4,100 at December 31, 2015 4. Annual store rent for $24,000 and was paid on March 1, 2015, covering the next 12 months. The balance in prepaid rent at December 31, 2014, was the balance remaining from the advance rent payment in 2014. 5. Wages are paid every other week on Friday, during 2015, Fischer paid $12,500 cash for wages. At December 31, 2015, Fischer owed employees unpaid and unrecorded wages of $350. 6. Depreciation on equipment totals $1,700 in 2015.Explanation / Answer
Accumulated depreciation - equipment is contra assets account
Minus use for decrease in account
Earned capital means net income
Cash +non cash - contra assets = liabilities + contributed capital +earned capital
Balance sheet
Income statements
Transaction
Cash
Non cash
Contra -assets
Liabilities
Contributed capital
Earned capital
Revenue
Expense
Net income
1
145850
145850
145850
145850
2
14500
76200
-61700
61700
-61700
3
-72100
-72100
0
0
4
-24000
4200
-19800
19800
-19800
5
-12500
250
-12750
12750
-12750
6
1700
-1700
1700
-1700
Adjustment entries
Transactions
Account title
Debit
Credit
1
Cash
145850
Sales revenue
145850
(To record sales revenue on cash.)
2
Cost of goods sold (76200-14500)
61700
Inventory
14500
Account payable
76200
(To record purchase of inventory on account and goods sold for the year.)
3
Account payable
72100
Cash (76200- 4100 unpaid )
72100
(To record payment on account payable.)
4
Prepaid rent (Jan 2016 to 1 may 2016 = 4 months) (24000*4/12= 8000) (8000 - 3800 as per balance sheet )
4200
Rent expense(rent for Jan to Apr. = 3800 as per balance sheet) (Rent of May to Dec = 8 months) (Rent for May to Dec 24000*8/12 = 16000) (Total =3800+16000)
19800
Cash
24000
(To record rent expense for the year.)
5
Wages expense (12500+250)
12750
Wages payable (350 -100 as per balance sheet )
250
Cash
12500
(To record wages expense for the year.)
6
Depreciation expense - equipment
1700
Accumulated depreciation – equipment
1700
(To record depreciation expense - equipment for the year)
Accumulated depreciation - equipment is contra assets account
Minus use for decrease in account
Earned capital means net income
Cash +non cash - contra assets = liabilities + contributed capital +earned capital
Balance sheet
Income statements
Transaction
Cash
Non cash
Contra -assets
Liabilities
Contributed capital
Earned capital
Revenue
Expense
Net income
1
145850
145850
145850
145850
2
14500
76200
-61700
61700
-61700
3
-72100
-72100
0
0
4
-24000
4200
-19800
19800
-19800
5
-12500
250
-12750
12750
-12750
6
1700
-1700
1700
-1700