Economy Small Engine Repair Ltd. Adjusted Trial Balance December 31, 2020

Tasks

1.Based on the adjusted trial balance, you decided to prepare ESERs first multiple step income statement (in good form). Note that Bob is using a Periodic Inventory system. A count of the inventory December 2021 was valued at $1,450.

2.Prepare the entry (in good form) to move the intermediate (temporary) accounts used in the periodic system to Cost of Goods Sold for 2020.

3.Your BUS 285 instructor discussed periodic and perpetual inventory systems. To date, you have been using a periodic inventory system for ESER. You decided to review your BUS 285 notes and prepare a summary of how a perpetual inventory system differs from a periodic inventory system and which type of inventory system would be more appropriate for Bob to use at ESER.

4.Explain the differences in the journal entries when you buy and sell something in both systems and list the accounts used in each system to do these journal entries. Also explain how cost of goods sold is calculated in both system

Cr. Dr. $13,117 1,900 1,250 800 6,250 $247 2,500 Account Name Cash Accounts receivable Inventory Prepaid insurance Repair equipment Accumulated depreciation - baking equipment Computer equipment Accumulated depreciation - computer equipment Accounts payable Income tax payable Unearned revenue Bank loan payable Common shares Dividends Repair revenue Advertising expense Purchases Purchase returns and allowances Freight in Depreciation expense Income tax expense Insurance expense Interest expense Utilities expense Sundry expense 278 485 3,500 500 5,000 15,000 9,500 23,150 350 7,500 400 50 525 3,500 400 83 235 600 $48,560 $48,560