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Accounting Extra Credit Problem Adjusting Entries, Closing Entries, Reversing Entries, and Effects on Individual Accounts, Income Statement, and Balance Sheet Note: Miracle Garden Supply uses a periodic inventory system The workbook includes a partial worksheet consisting of (1) An Unadjusted Trial Balance (2) Year-end Adjustments (3) An Adjusted Trial Balance The year-end adjusting journal entries (AJES) have already been recorded, each AJE is identified by a lower case letter in parenthesis (for example, (a) (b)(c), (d), etc.). When the requirement asks for a journal entry, be sure to prepare the journal entry with the proper format: (1) Date (2) Indentation, where applicable (3) Recording accounts that are Debited, first, followed by accounts that are Credited (4) Using the proper Account Title, as reflected on the worksheet (5) Explanations Note: Be sure to write legibly and do not write too small; if I am not able to read your answer, I will simply count the answer as INCORRECT. Requirements: 1. For each AJE, (e) through (i), give an explanation for the journal entry, As an example, AJES (a) and (b) are explained below: (a) To eliminate Beginning Inventory (b) To record Ending Inventory 2. Using the Adjusted Trial Balance, prepare the CLOSING ENTRIES for Miracle Garden Supply NOTE: Please use compound journal entries. Also, in Canvas, Module 11 (Miscellaneous), there is a blank General Journal sheet. Feel free to print as many pages as you need to record journal entries. For an explanation of a "compound journal entry", in your textbook, please refer to Chapter 2, Section Al, transaction number 6., "Point" - in the left margin, next to item [3). Also, refer to Canvas, Module 11, "Compound Journal Entry". When closing the INCOME STATEMENT temporary accounts into INCOME SUMMARY: (1) group together all of the temporary accounts with CREDIT balances and close those accounts into Income Summary (2) group together all of the temporary accounts with DEBIT balances and close those accounts into Income Summary -Extra Credit Assignment Es, Clong Entries, Revisg Entries (INSTRUCTIONS) 2 Page 1 of 3 INSTRUCT Accounting Extra Credit Problem Adjusting Entries, Closing Entries, Reversing Entries, and Effects on Individual Accounts, Income Statement, and Balance Sheet Requirement - No. 2 (Cont'd): Don't forget to close the balance of the INCOME SUMMARY account. Don't forget to close the balance of the DIVIDENDS account. 3. Using the Adjusted Trial Balance, what is the amount of Net Income or Net (Loss) of Miracle Garden Supply for the year ended December 31, 2019? Please identify clearly whether the amount is Net Income or Net (Loss), please show clearly how you calculated the amount. NOTE: Do not prepare an Income Statement; simply, calculate the Net Income or Net Loss. Remember, Miracle Garden Supply is a merchandiser AND uses a periodic inventory system. -- Accordingly, to calculate Net Income or Net (Loss), you will need to compute Cost of Goods Sold (See APPENDIX 4A, "Calculation of Cost of Goods Sold" - just to the left of the paragraph "Preparing Financial Statements". -- "Net Purchases" (Purchases - Purchases Returns & Allowances - Purchases Discounts) -- "Net Cost of Purchases" = Net Purchases + Transportation-In -- Beginning Inventory is the Merchandise Inventory amount reflected in the Unadjusted Trial Balance. -- Ending Inventory is the Merchandise Inventory amount reflected in the Adjusted Trial Balance 4. Using the Adjusted Trial Balance, what is the amount of Total ASSETS, Total LIABILITIES, and Total EQUITY for the year ended December 31, 2019? NOTE: To calculate Total Equity, don't forget to use the amount calculated in Requirement 3., above. Also, clearly identify each of your respective amounts as being Total ASSETS, Total LIABILITIES, and Total EQUITY. Please show clearly how you calculated the amount. NOTE: Do not prepare a Balance Sheet; simply, calculate the amounts as requested. REVERSING ENTRIES: NOTE: To determine the account balances on January 1, 2020 as requested for each item below. use the 2019 ending balance per the Adjusted Trial Balance on December 31, 2019. Also, remember the effect of the December 31, 2019 closing entries with regard to the account balance that is being carried forward to January 1, 2020. Em Credit A mers AJES. Clong Ene rgies (INSTRUCTIONS) 2 Page 2 of 3 INSTRUC Accounting Extra Credit Problem Adjusting Entries, Closing Entries, Reversing Entries, and Effects on Individual Accounts, Income Statement, and Balance Sheet REVERSING ENTRIES (Continued): 5. If the AJE for supplies expense (adjustment (d) is recorded as a reversing entry on January 1, 2020, be the balance of the Supplies account at the end of the day, January 1, 20207 (Assume no other journal entries to this account are recorded on January 1.2020.) Please identify the balance as a DEBIT balance or a CREDIT balance. Please show how you calculated the amount 6. the AJE for interest income adjustment Chilis recorded as a reversing entry on January 1, 2020, what will be the balance of the Interest Income account at the end of the day, January 1, 2020? (Assume no other journal entries to this account are recorded on January 1, 2010) Please identify the balance as a DEBIT balance or a CREDIT balance. Please show how you calculated the amount. 7. Ir the AJE for interest income adjustment (h)] is recorded as a reversing entry on January 1, 2020, what will be the balance of the Interest Receivable account at the end of the day, January 1, 2020? (Assume no other journal entries to this account are recorded on January 1, 2020) Please identify the balance as a DEBIT balance or a CREDIT balance. Please show how you calculated the amount. 8. If the AJE for wages expense (adjustment is recorded as a reversing entry on January 1, 2020, what will be the balance of the Wages Payable account at the end of the day, January 1, 2020? (Assume no other journal entries to this account are recorded on January 1, 2020.) Please identify the balance as a DEBIT balance or a CREDIT balance. Please show how you calculated the amount 9. On January 30, 2020, Miracle Garden Supply receives payment of the Note Receivable; the payment includes interest of $80. What is the Interest Income account balance on January 31, 2020? (Don't forget to consider the Interest Income account balance on January 1, 2020 which was determined in item 6.) (Assume no other journal entries to the Interest Income account are recorded during January) Please identify the balance as a DEBIT balance or a CREDIT balance. Please show how you calculated the amount. Be Credit Agent AJE in Entries Revig Eres INSTRUCTIONS) 2 Page 3 of 3 INSTRUCTION Miracle Garden Supply [Partial Worksheet For the Year Ended December 31, 2019 Account Name Description Debit 125000 Credit Adjusted Trial Balance Debit Credit Credit Notes Receivable Acts Receive Merchandise 29.416.00 29.446.00 64,900.00 67.000.00 Supplies Prepaid Insurance 229 1,400.00 12,000.00 90,000.00 315.000 580.00 12,000.00 90.000.00 33 000 00 37,000.00 Building Accumulated Depreciation Building Equipment Accumulated Depreciation Equipment Notes Payable Accounts Payable Uncanned Course Fees Mortgage Payable Capital Stock Retained an 4.000.00 20.400.00 3.00000 16,400 00 ) 3.000.00 36.200.00 1,200.00 (6) 8,000 000 50.000.000 300.00 8,000.00 50,000.00 90,574.00 195.180.00 195,180.00 840.00 1,63000 1.68000 130 00 h 87,140 00 87.14000 83200 Sales Returns and Allowances Sales Discounts Interest Income Purchases Purchases Returns and Allowances Purchases Discounts Freighe-In Wages EN Taxes Expense Interest E nse Miscellaneous Expense TOTAL 2.460 00 47,020 00 246000 45.80000 1,900.00 174.00 200.00 4349540013495400 Income Summary (a) 67,000.00 2.100 00 64.900.0 95.00 380.00 Course Fees Income Supplies Expense Insurance Expense Depreciation Expense - Building Depreciation Expense - Equipment Interest Receivable Wages Payable TOTAL 925 00 380.00 5.000.00 4,000.00 4.000.00 5400 1,22000 1.22000 4452200 445,228 001 Page 1 of 1