NEW YORK BOUTIQUE_Financial Statements

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Description

P3.10.

(adjusting and Closing)

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Presented below is the December 31 trial balance of New York
Boutique.

NEW YORK BOUTIQUE

TrialBalance

December31

Debit

Credit

Cash

18,500?$

Accounts
Receivable

32,000

Allowance
for Doubtful Accounts

?700???$

Inventory,
December 31

80,000

Prepaid
Insurance

5,100

Equipment

84,000

Accumulated
Depreciation—Equipment

35,000

Notes
Payable

28,000

Common
Stock

80,600

Retained
Earnings

10,000

Sales
Revenue

600,000

Cost
of Goods Sold

408,000

Salaries
and Wages Expense (sales)

50,000

Advertising
Expense

6,700

Salaries
and Wages Expense (administrative)

65,000

Supplies
Expense

5,000

$754,300

$754,300

Instructions

(a)

Construct
T-accounts and enter the balances shown.

(b)

Prepare
adjusting journal entries for the following and post to the T-accounts.
(Omit explanations.) Open additional T-accounts as necessary. (The books
are closed yearly on December 31.)

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1.

Bad
debt expense is estimated to be $1,400.

2.

Equipment
is depreciated based on a 7-year life (no salvage value).

3.

Insurance
expired during the year $2,550.

4.

Interest
accrued on notes payable $3,360.

5.

Sales
salaries and wages earned but not paid $2,400.

6.

Advertising
paid in advance $700.

7.

Office
supplies on hand $1,500, charged to Supplies Expense when purchased.

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(c)

Prepare
closing entries and post to the accounts.

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