Quiz 5-Adjusting Entries/Worksheet

Design Home Furnishings is a retail store. On December 31, 2015, the firm's general ledger contained the following accou
Adjustment data are shown below:

Unadjusted
Trial Balance Adjustments
Debit Credit Debit Credit
Cash $ 8,000
Accounts Receivable 7,000
Allowance for doubtful accounts - b $ 350
Merchandfise Inventory, January 1 40,000
Store Supplies 1,300 c 900
Prepaid Advertising 1,800 d 600
Store Equipment 8,000
Accumulated Depreciation-Store Equipmednt $ 1,400 e 1,400
Accounts Payable 3,600
Salaries Payable - f 3,000
Rich Gaza, Capital 36,500
Rich Gaza, Drawings 26,000
Income Summary - a 44,000
Merchandise Inventory, end a 44,000
Sales 278,500
Sales Returns and Allowances 6,800
Purchases 136,000
Purchanse returns and allowances 1,600
Rent Expense 36,000
Telephone Expense 900
Salaries Expense 45,000 f 3,000
Taxes and Licenses 3,600
Store Supplies expense c 900
Advertising expense 1,200 d 600
Depreciation Expense-Store Equipment - e 1,400
Doubtful Accounts Expense - b 350
$ 321,600 $ 321,600 $ 50,250 $ 50,250
Net Income

Adjustments:
a. Merchandise Inventory: December 31, 2015, is P44,000 (Record the ending inventory and carry
forward the beginning inventory to the income statement account. The beginning inventory
will be included in the closing of nominal accounts.
b The firm estimates that 5% of the outstanding accounts receivable
is doubtful of collection
c On December 31, 2015, an inventory of store supplies showed that items
costing P400 were on hand.
d OnNovember 1, 2015, the firm signed a 6-month advertising contract
 for P1,800 and paid the full amount in advance.
e On January 3, 2014, the firm purchased store equipment for P8,000.
At that time, the equipment was estimated to have a useful life of
five years and a salvage value of P1,000
f On December 31, 2015, the firm owed salaries of P3,000 to part-time
employees. These salaries will not be paid until 2016.

ADJUSTING ENTRIES
a Merchandise Inventory, ending 44,000
Income Summary 44,000

b Doubtful Accounts Expense 350

Allowance for doubtful accounts 350
($7,000 x .05) = $350

c Store Supplies expense 900

Store Supplies 900
($1,300-$400) = $900

d Advertising expense 600

Prepaid Advertising 600
($300 per month x 2 months)

e Depreciation-store equipment 1,400

Accumulated depreciation-store equipment 1,400
($8,000-$1,000) = $7,000/5 = $1,400

f Salaries expense 3,000

Salaries Payable 3,000

DESIGN HOME FURNISHINGS

Worksheet
December 31, 2015

Unadjusted
Trial Balance Adjustments
Debit Credit Debit Credit
Cash ₱ 8,000
Accounts Receivable 7,000
Allowance for doubtful accounts -
Merchandfise Inventory, January 1 40,000
Store Supplies 1,300
Prepaid Advertising 1,800
Store Equipment 8,000
Accumulated Depreciation-Store Equipmednt ₱ 1,400
Accounts Payable 3,600
Salaries Payable -
Rich Gaza, Capital 36,500
Rich Gaza, Drawings 26,000
Income Summary -
Merchandise Inventory, December 31
Sales 278,500
Sales Returns and Allowances 6,800
Purchases 136,000
Purchanse returns and allowances 1,600
Rent Expense 36,000
Telephone Expense 900
Salaries Expense 45,000
Taxes and Licenses 3,600
Store Supplies expense
Advertising expense 1,200
Depreciation Expense-Store Equipment -
Doubtful Accounts Expense -
Total ₱ 321,600 ₱ 321,600
Net Income or Loss
tained the following accounts and balnces.

Adjusted Income Statement Balance Sheet/

Trial Balance Statement of Financial Position
Debit Credit Debit Credit Debit Credit
$ 8,000 $ 8,000
7,000 7,000
$ 350 $ 350
40,000 $ 40,000
400 400
1,200 1,200
8,000 8,000
2,800 2,800
3,600 3,600
3,000 3,000
36,500 36,500
26,000 26,000
44,000 44,000
44,000 44,000
278,500 278,500
6,800 6,800
136,000 136,000
1,600 1,600
36,000 36,000
900 900
48,000 48,000
3,600 3,600
900 900
1,800 1,800
1,400 1,400
350 350
$ 370,350 $ 370,350 $ 275,750 $ 324,100 $ 94,600 $ 46,250
- 48,350 48,350
$ 324,100 $ 324,100 $ 94,600 $ 94,600
 ME FURNISHINGS
orksheet
mber 31, 2015

Adjusted
Trial Balance Income Statement Balance Sheet
Debit Credit Debit Credit Debit Credit
FINANCIAL STATEMENT PREPARATION
From the adjusted balance trial balance of Design Home Furnishings, preparation of
1. Income Statement (Functional Form) ; 2. Statement of Changes in Equity; 3. Balance Sheet (Report
period ending December 31, 2015.

Adjusted
Trial Balance
Cash $ 8,000
Accounts Receivable 7,000
Allowance for doubtful accounts 350
Merchandise Inventory, January 1 40,000
Store Supplies 400
Prepaid Advertising 1,200
Store Equipment 8,000
Accumulated Depreciation-Store Equipmednt 2,800
Accounts Payable 3,600
Salaries Payable 3,000
Rich Gaza, Capital 36,500
Rich Gaza, Drawings 26,000
Sales 278,500
Sales Returns and Allowances 6,800
Purchases 136,000
Purchanse returns and allowances 1,600
Rent Expense 36,000
Telephone Expense 900
Salaries Expense 48,000
Taxes and Licenses 3,600
Store Supplies expense 900
Advertising expense 1,800
Depreciation Expense-Store Equipment 1,400
Doubtful Accounts Expense 350

Additional Information:

Inventory count on December 31, 2015: P44,000.

DESIGN HOMES FURNISHINGS

Income Statement
For the period ending December 31, 2015

Gross Sales
Less: Sales Retiurns amd Allowances
Net Sales
Less: Cost of Sales
Merchandise Inventory, Januiary 1
Add: Purchases $ 136,000
Less: Purchase Returns and Allowances 1,600
Goods Available for Sale
Less: Merchandise Inventory, December 31
Cost of Sales
Gross Profit
Less: Expenses
Administrative Expenses
Salaries Expnse $ 48,000
Rent Expense 36,000
Taxes and Licenses 3,600
Telephone Expense 900
Doubtful Accounts Expense 350

Distribution Expenses
Advertising Expense $ 1,800
Depreciation Expense-Store Equipment 1,400
Store Supplies Expense 900
Total Expenses

Net Income

DESIGN HOMES FURNISHINGS

Statement of Changes in Owner's Equity
For the period ending December 31, 2015

Rich Gaza, Capital January 1, 2015

Add: Net Income for the period
Sub-Total
Less: Rich Gaza, Drawings
Rich Gaza, Capital Decem,ber 31, 2015

DESIGN HOMES FURNISHINGS

Statement of Financial Position
December 31, 2015

ASSETS
Current Assets
Cash
Accounts Receivable $ 7,000
Less: Allowance for doubtful Accounts 350
Merchandise Inventory
Store Supplies
Prepaid Advertising
Total Current Assets

Non-Current Assets
Store Equipment
Less: Accumulated Depreciation
Carrying Value

Total Assets

LIABILITIES AND EQUITY

Current Liabilities
Accounts Payable
Salaries Payable
Total Current Liabilities

Equity
reparation of
quity; 3. Balance Sheet (Report Format) for the

INGS

er 31, 2015

$ 278,500
6,800
$ 271,700
 $ 40,000

134,400
$ 174,400
44,000
130,400
$ 141,300

$ 88,850

4,100
92,950

$ 48,350

INGS
er's Equity
er 31, 2015

$ 36,500
48,350
$ 84,850
26,000
$ 58,850

INGS
sition

$ 8,000

6,650
 44,000
400
1,200
$ 60,250

8,000
2,800
5,200

$ 65,450

$ 3,600
3,000
$ 6,600

58,850

$ 65,450