Part 1: The inventory account of Olympic Sports Wear is as follows.

1. Merchandise inventory account balance $75,000
2. Physical inventory $71,500

Instruction: Prepare the adjustment journal entry. Part 2: The information relating to the inventory of Olympic Sports Wear is as follows:

1. Merchandise inventory accounts balance $75,000
2. Physical inventory $98,200

Instruction: Prepare the adjustment journal entry. Part 3: Olympic Sports Wear furnishes the following information:

1. On January 1, 2006, the supplies account has $7,200 balance
2. During the year, supplies are purchased for $5,000
3. On December 31, 2005, the supplies account has a closing balance of $2,200.

Instruction: Prepare the adjusting journal entry. Part 4: Olympic Sports Wear furnishes the following information:

1. An insurance policy is purchased on December 1, 2005 for three months (December through February). The premium amount for the quarterly period is $1,500.
2. The clerk debited the Prepaid Insurance account for $1500.
3. At the end of the account year (on March 31, 2006), only one month cost $500 has expired. The value of the unexpired insurance is $1,000.

Instruction: Prepare the adjusting journal entries for the Prepaid Insurance Account. Part 5: Olympic Sports Wear estimates its Annual Federal Income tax as $10,000. It has paid the tax in four installments of $2,500 each. However, at the end of the year, the actual tax amount is $11,200.

Therefore, the company needs to pay $1,200 to the government.