The unadjusted trial balance of World Enterprises for the year ending December 31, 2021, follows:

Additional information:

1. There is $750 of supplies on hand on December 31, 2021.

2. The one-year insurance policy was purchased on March 1, 2021.

3. Depreciation expense for the year is $10,000 for the equipment and $4,500 for the furniture.

4. Accrued interest expense at December 31, 2021, is $675.

5. Unearned revenue of $975 is still unearned at December 31, 2021. On the sales that were earned, cost of goods sold was $1,750.

6. A physical count of merchandise inventory indicates $32,750 on hand on December 31, 2021.

7. Global uses the perpetual inventory system and the earnings approach.

Instructions

a. Prepare the adjusting journal entries assuming they are prepared annually and update account balances.

b. Prepare a multiple-step income statement.

c. Prepare a single-step income statement.

d. Prepare the closing entries.

Compare a single-step income statement and a multiple-step income statement for a merchandising company. How are they similar and diff erent? Comment on the usefulness of each one.

Transcribed Image Text:

WORLD ENTERPRISES Trial Balance December 31, 2021 Debit Credit Cash $ 15,000 Accounts receivable 19,200 Merchandise inventory Prepaid insurance Supplies Equipment Accumulated depreciation-equipment 37,050 3,000 2,950 150,000 $ 35,000 Furniture 45,000 Accumulated depreciation-furniture Accounts payable Unearned revenue 18,000 33,200 4,000 Mortgage payable S. Kim, capital S. Kim, drawings Sales 125,000 46,200 48,000 265,000 Sales returns and allowances 2,500 3,275 Sales discounts Cost of goods sold Interest expense Salaries expense Utilities expense 153,000 6,875 35,450 5,100 $526,400 $526,400