Adjusting & Closing
Journal entries that transfer the end-of-period balances in revenue and expense accounts to Owner Capital (a permanent equity account).
What are closing entries?
This organizes assets and liabilities into subgroups.
What is a classified balance sheet?
The term used for the expense of buying and preparing merchandise for sale.
What is cost of goods sold?
Merchandise Inventory is this type of account.
What is a current asset?
On April 30, Roja Merchandisers sold $3,000 in inventory to Stone Company under credit terms 3/15, n/30. The goods cost Roja $2,500. This is the journal entry for the revenue.
What is:
Accounts Receivable $3,000
Sales $3,000
?
The temporary account used only for the closing process that contains a debit for total expenses/losses and a credit for total revenues/gains.
What is the Income Summary account?
Current vs. Noncurrent:
Wages payable is a _____________ liability, but notes payable (due in 3 years) is a ______________ liability.
What are current and non-current?
The expenses of advertising merchandise, making sales, and delivering goods to customers.
What are selling expenses?
The credit terms 3/15, n/30 means a ____% discount if the amount is paid within ____ days, or the full balance due in 30 days.
What are 3% and 15 days?
On April 30, Roja Merchandisers sold $3,000 in inventory to Stone Company under credit terms 3/15, n/30. The goods cost Roja $2,500. This is the journal entry for the cost/expense.
What is:
Cost of Goods Sold $2,500
Merchandise Inventory $2,500
?
Temporary vs. Permanent:
Accounts Receivable is a ____________ account, but Telephone expense and sales revenue are _____________ accounts.
What are permanent and temporary?
The assets section of a classified balance sheet usually includes the subgroups current assets, long-term investments, plant assets, and this.
What are intangible assets?
Beginning inventory plus net purchases equals this.
What is merchandise available for sale?
At the beginning of the period, Pebble Company had $14,000 of inventory. During the year, Pebble Company purchased $24,000 of merchandise and sold $10,000 of merchandise. A physical count of inventory at year-end shows $26,000 of inventory exists. This is the entry to record inventory shrinkage.
What is:
Cost of Goods Sold $2,000
Merchandise Inventory $2,000
?
On May 4, Stone Company returns $750 worth of products because they did not fit their needs. Roja Merchandisers restores the products, which cost $625, to its inventory. This is the revenue side of the return.
What is:
Sales Returns and Allowances $750
Accounts Receivable $750
?
This is the adjusting journal entry for $50 expired insurance at the end of the period.
What is:
Insurance Expense $50
Prepaid Insurance $50
?
An income statement that includes cost of goods sold as an expense and shows only one subtotal for total expenses instead of breaking down the calculation.
What is a Single-step income statement?
The operating cycle for a merchandiser that sells only for cash moves from purchases of merchandise to inventory to this.
What are cash sales?
Sally Company purchased $16,000 of merchandise from their supplier with credit terms of 3/10, n/30, invoice dated December 9, and FOB shipping point. This is the journal entry for the purchase.
What is
Merchandise Inventory $16,000
Accounts Payable $16,000
?
On May 5, Stone Company discovers that some of the products are scratched, but they are still of use and, therefore, keeps the products. Roja Merchandisers gives a price reduction (allowance) for $250 to compensate for the damage. This is the journal entry for the allowance.
What is:
Sales Returns and Allowances $250
Accounts Receivable $250
?
ABC Company's had $25,000 in revenues and $5,000 in expenses this year. The owner, capital account had $4,000 at the beginning of the year and the owner withdrew $1,000 throughout the year. This is the ending owner, capital account amount on the post-closing trial balance.
What is $23,000?
Beginning $4,000
+ Net Income $20,000 ($25,000 rev - $5,000 exp)
- Withdrawals $1,000
In the process of completing a work sheet, the accountant determines that the Income Statement debit column totals $49,000, while the Income Statement credit column totals $23,000. To enter net income (or net loss) for the period into the work sheet would require an entry to _______ (debit or credit?) the Income Statement column and _______ (debit or credit?) the Balance Sheet & Statement of Owner's Equity column.
What are credit and debit?
This account is used in the periodic inventory system but not used in the perpetual inventory system.
What is Purchases?
Sally Company purchased $16,000 of merchandise from their supplier with credit terms of 3/10, n/30, invoice dated December 9, and FOB shipping point. On December 13, they returned $3,000 of merchandise. This is the journal entry when Sally sends a check on December 16, net of the discount and the returned merchandise.
What is
Accounts Payable $13,000
Merchandise Inventory $390
Cash $12,610
?
A/P ($16,000 - $3,000 = $13,000)
Merch Inv/Discount ($13,000 x 3% = $390)
Cash ($13,000 - $390 = $12,610)
On April 30, Roja Merchandisers sold $3,000 in inventory to Stone Company under credit terms 3/15, n/30. The goods cost Roja $2,500. Stone Company returned $750 worth of products and received a $250 allowance for scratched projects. This is the journal entry when Roja Merchandisers receives payment on May 6.
What is:
Cash $1,940
Sales Discounts $60
Accounts Receivable $2,000
?
A/R ($3,000 - $750 - $250 = $2,000)
Discount ($2,000 x 3% = $60)
Cash ($2,000 - $60 = $1,940)