On June 30, 2019, the balances of the accounts appearing in the ledger of Simkins Company are as follows:

Instructions
1. Does Simkins Company use a periodic or perpetual inventory system? Explain.
2. Prepare a multiple-step income statement for Simkins Company for the year ended
June 30, 2019. The merchandise inventory as of June 30, 2019, was $508,000. The adjustment for estimated returns inventory for sales for the year ending December 31, 2019, was $33,000.
3. Prepare the closing entries for Simkins Company as of June 30, 2019.
4. What would the net income have been if the perpetual inventory system had been used?

Transcribed Image Text:

Cash Accounts Receivable Merchandse Inventory, July 1, 2018 Estimated Returns Inventory Office Supplies Prepaid Insurance Land Store Equipment Accumulated Depreciation- $4,100,000 32,000 13,000 5,000 580,000 315,000 18,000 125,000 Purchases 340,000 Purchases Returns and Allowances 415,000 Purchases Discounts 25,000 Freight In 9,000 Sales Salaries Expense 18,000 Advertising Expense 300,000 Delivery Expense 550,000 Depreciation Expense- Store Equipment Miscellaneous Selling Expense Office Salaries Expense Rent Expense Insurance Expense Office Supplies Expense Depreciation Expense- 12,000 28,000 375,000 3,000 17,000 5,000 Store Equipment Office Equipment Accumulated Depreciation- 190,000 250,000 Office Equipment Accounts Payable Customer Refunds Payable Salaries Payable Unearned Rent Notes Payable Amy Gant, Capital Amy Gant, Drawing Sales 110,000 85,000 20,000 9,000 Office Equipment 4,000 16,000 32,500 2,500 6,000 Miscellaneous Administrative Expense 50,000 Rent Revenue 820,000 Interest Expense 275,000 6,590,000