Applying the Entire Accounting Cycle: The post-closing trial balance for Wilson Corp., a retailer, at December 31, 2019, follows.

The following transactions occurred during 2020 in the order shown (use the number at the left in place of a date). 1. Sales revenue was $30,000, of which $10,000 was on credit; the cost, provided using perpetual inventory, was $19,500. 2. Collected $17,000 cash on accounts receivable. 3. Paid $4,000 cash toward income taxes payable (2019). 4. Purchased $40,000 of merchandise, of which $8,000 was on credit. 5. Paid $6,000 cash toward accounts payable. 6. Sales revenue was $72,000 (in cash); cost was $46,800. 7. Paid $19,000 cash in operating expenses. 8. On July 1, 2020, issued 1,000 shares of common stock, par $1, for $1,000 cash. 9. Purchased $100,000 of merchandise, of which $27,000 was on credit. 10. Sales revenue was $98,000, of which $30,000 was on credit; cost, $63,700. 11. Collected $26,000 cash toward accounts receivable. 12. Paid $28,000 cash toward accounts payable. 13. Paid $18,000 cash for various operating expenses.

a. Prepare general journal entries for each of the transactions above for 2020.

• Note: List multiple debits or credits (when applicable) in alphabetical order according to the first letter of the account name.

b. Set up T-accounts as the general ledger for each of the accounts listed in the above trial balance and enter the December 31, 2019, balances. Post the journal entries from part a.

• Note: Enter amounts in the order that they are presented above (1 through 13), using the first available answer field on the appropriate side of the T-account. Not all answer fields will be used. Do not enter reference numbers.

c. Prepare an unadjusted trial balance.

d. Prepare December 31, 2020, adjusting entries for the following additional information. 1. Increase Allowance for Doubtful Accounts by $200. (Hint: Debit Operating Expenses.) 2. Accrued income tax expense is $11,784. (Hint: Credit Income Taxes Payable.) 3. Accrued salaries were $300. 4. Use straight-line depreciation for equipment. 5. Adjust Prepaid Insurance for current year expense.

e. Post adjusting journal entries from part d to the ledger.

f. Prepare an adjusted trial balance.

g. Prepare the income statement and balance sheet.

• Note: Record expenses in alphabetical order based upon the first letter of the account name.
• Note: Do not use negative signs with your answers.

h. Prepare the closing entries, using the Income Summary account to close out revenues and expenses.

• Note: List multiple debits or credits (when applicable) in alphabetical order according to the first letter of the account name.

i. Post the closing entries to the ledger.

j. Prepare a post-closing trial balance.

Show transcribed image text

Acc. No. Description Debit Credit 101 Cash 0 $ 27,000 $ 21,000 102 Accounts receivable 103 1,000 104 35,000 105 900 200 50,000 201 22,500 7,500 300 301 Allowance for doubtful accounts Inventory (perpetual inventory system) Prepaid insurance (20 months remaining) Equipment (20-year estimated life, no residual value) Accumulated depreciation equipment Accounts payable Salaries payable Income taxes payable (for 2019) Common stock, par $1 Retained earnings Sales Cost of goods sold Operating expenses Income tax expense 302 4,000 400 80,000 18,900 401 500 600 601 602 700 Income summary Total $133,900 $133,900 Journal Entries T-Accounts Unadjusted Trial Balance Adjusting Journal Entries T-Accounts after Adjusting Journal Entries Adjusted Trial Balance Financial Statements Closing Journal Entries T-Accounts After Closing Journal Entries Post-Closing Trial Balance