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Hello, Financial Accounting 1.
I would like to review problem 15-10A where they give us what
you will find on page 599, and they give us the trial balance
in its entirety on page 601.
They've given us the adjusting entries, which are here, and
then we will do the adjusted trial balance, income
statement, and balance sheet.
We will then journalize the adjusting entries and closing
entries and then complete and make sure that we're in
balance with the post closing trial balance.
So let's get started.
There's a lot to do.
So they tell us, A and B, merchandise inventory as of
December 31 is $28,900.
We had a balance at the beginning of
the month of $33,000.
We need to remove that from our entry, from our account.
So if we have a debit balance, we need to credit it by
$33,000 and debit income summary.
Next we will have merchandise inventory of $28,900, which is
what we want for the ending balance, and we will then
credit income summary.
Next we have unused supplies of $1,350 We have a starting
balance of $1,600 so that means we have to adjust for
$250, so we're going to decrease by crediting the
supplies account.
And you will see we have to debit our supplies expense.
Insurance expired of $300 so that means we will decrease by
crediting our insurance.
And then insurance expense will be our debit.
Depreciation expense for the year is $500, and then we need
the depreciation expense equipment for $500.
Wages earned but not paid is $480, so we need to account
for that in wages payable, and we will
expense it in wages expense.
Unearned revenue of $1,000 we need to account for.
So our unearned revenue account will now have a credit
balance of $1,000.
It started with a $5,000 credit balance.
To decrease it, we need to debit $4,000, and we will also
debit sales for $4,000.
So now that we've put in all our adjusting entries, we need
to complete the worksheet, which is just taking our
numbers and pulling them across making sure that now
the balances are correct, where if we have a debit
balance and we have a credit adjustment, it decreases the
adjustment.
If we have a credit balance and a credit adjustment, it
will increase our balance.
And we will continue to do this all the way down.
We made sure that our debits and credits tied out, and we
we're making sure that our debits and
credits, again, equal.
Now, we will continue to create our balance sheets.
We take our balance, and we just pull them over.
And remember, our balance sheet
numbers are all of these.
It is our cash, our accounts receivable, all our assets,
our liabilities in any owners account.
We will pull those numbers over to be part
of our balance sheet.
Next we will take our income statement numbers, which as
you can see is our revenue and our expenses.
Our net difference, if it's a debit net difference, we have
net income.
Equal and opposite should be a net difference on the balance
sheet of a credit.
Now, we know that we have a net income.
We continue down and each and every one of these entries we
now have to write the description.
Just that way we put them into the appropriate accounts.
So we have income, summary, merchandise
inventory, and so on.
We're just taking these numbers from up above and
journalizing them.
Now, we have to think again.
We need to close out our accounts.
So we need to close out our sales, our interest revenue,
our purchases and sales allowances.
So we're going to take these numbers to create and offset
it to our net income.
These numbers, we're going to look and get the
totals from up above.
Next we're going to take all our expenses, take the total
and offset that entry to our income summary.
We are then going to take what should be our net income, and
let's confirm that it is.
Yeah, $610.
And we're going to take what is in our income summary and
put it into our capital.
This is WP Ellis' net income for the month.
We now also have to close out our drawing account to our
capital account.
We also need to do a reversing entry because now we've paid
the wages, and it's no longer a payable
and it is an expense.
So $480, we're going to be reversing it
out of these accounts.
Now we're going to just take our balances after all our
closing entries have been made and confirm that these
balances, after these entries, have been made that these
balances now tie out.
But now we only have a balance sheet because we've put
everything into our capital account.
And you will see we do tie out.
I hope this helps.
And if you have any problems, please reach out to me.