(Adjusting and Closing) Presented below is the December 31 trial balance of Nancy Drew Boutique.

Instructions

(a) Construct T-accounts and enter the balances shown.

(b) Prepare adjusting journal entries for the following and post to the T-accounts. Open additional T-accounts as necessary. (The books are closed yearly on December 31.)
(1) Bad debts are estimated to be $1,400.
(2) Furniture and equipment is depreciated based on a 6-year life (no salvage).
(3) Insurance expired during the year $2,550.
(4) Interest accrued on notes payable $3,360.
(5) Sales salaries earned but not paid $2,400.
(6) Advertising paid in advance $700.
(7) Office supplies on hand $1,500, charged to Office Expense when purchased.

(c) Prepare closing entries and post to the accounts.

Transcribed Image Text:

Cash Accounts Receivable NANCY DREW BOUTIQUE TRIAL BALANCE DECEMBER 31 Allowance for Doubtful Accounts Inventory, December 31 Prepaid Insurance Furniture and Equipment Accumulated Depreciation of Furniture and Equipment Notes Payable Common Stock Retained Earnings Sales Cost of Goods Sold Sales Salaries Expense Advertising Expense Administrative Salaries Expense Office Expense Debit Credit $ 18,500 42,000 $ 700 80,000 5,100 84,000 35,000 28,000 80,600 10,000 600,000 398,000 50,000 6,700 65,000 5,000 $754,300 $754,300