Part 3: Carl Redmon decided to expand his business and begin selling accounting
ID: 2571525 • Letter: P
Question
Part 3:
Carl Redmon decided to expand his business and begin selling accounting software, as well as providing consulting services. During january, Carl Redmon Consulting completed these transactions:
jan 2 completed a consulting engagement and received cash of $7,200
2 prepaid three months office rent $1500
7 purchased software inventory on account $3900 plus freight in $100
15 withdrew $700 for personal use
18 sold software on account $1,100 (cost $700)
19 consulted with a client for a fee of $900 on account
20 paid the secretarys salary for the month
21 paid on account $2000
24 paid utilities $300
28 sold software for cash $600 (cost $400)
31 recorded these adjusting entries:
a) accrued salary expense
b) depreciation of computer and furniture
c) expiration of prepaid rent
d) expiration of prepaid insurance
e) physical count of inventory $2800
f) earned the remaining revenue from december 22
g) redmon estimates that 3% of inventory sold will be returned
Required:
1) prepare journal entries for the above transactions and post these to the ledger
2) prepare adjusting entries on january 31 and post to the ledger
3) prepare an adjusted trial balance, and income statement, a statement of owners equity, and a balance sheet of/ on january 31, 2016
4) prepare closing entries at january 31, 2016 and post to the ledger
5) prepare a post closing trial balance on january 31, 2016
REALLY JUST NEEDING HELP WITH ADJUSTING ENTRY "E" and "G"
Explanation / Answer
Adjusting entry for e:
Physical count of inventory disclosed $2,800 of software, balance is cost of goods sold.
ie., Inventory = Purchases - Cost of goods sold
=3900-(700+400)
=2800.
As physical count as well as inventory disclose the same value, the entry is
Cost of goods sold a/c Dr
To Inventory a/c Cr
(Being cost of goods sold recorded in the books).
Adjusting entry for G:
Sales returns a/c Dr
To Allowance for sales returns a/c Cr
(Being sales returns estimated recorded)
These expected returns will get added to the inventory if returned, hence, the entry for this expected addition to inventory would be as follows:
Estimated returns - Inventory a/c Dr
To Cost of goods sold a/c Cr
(Being estimated returns reduced from cost of goods sold)