Preparing Adjusting Entries, Financial Statements, and Closing Entries Fischer Card Shop is a small retail shop. Fischer's balance sheet at year-end 2013 is as follows. The following information details transactions and adjustments that occurred during 2014. 1. Sales total $145,850 in 2014; all sales were cash sales. 2. Inventory purchases total $76,200 in 2014; at December 31, 2014, inventory totals $14,500. Assume all purchases are made on account. 3. Accounts payable totals $4,100 at December 31, 2014. 4. Annual store rent for $24,000 and was paid on March 1, 2014, covering the next 12 months. The balance in prepaid rent at December 31, 2013, was the balance remaining from the advance rent payment in 2013. 5. Wages are paid every other week on Friday; during 2014, Fischer paid $12,500 cash for wages. At December 31, 2014, Fischer owed employees unpaid and unrecorded wages of $350. 6. Depreciation on equipment totals $1,700 in 2014.

Fischer Card Shop Balance Sheet December 31, 2013
Cash		$8,500	Accounts payable	$5,200
Inventories		12,000	Wages payable	100
Prepaid rent		3,800	Total current liabilities	5,300
Total current assets		24,300	Total equity (includes retained earnings)	23,500
Equipment	$7,500		Total liabilities and equity	$28,800
Less Accumulated depreciation	3,000
Equipment, net		4,500
Total assets		$28,800

(b) Set up T-accounts, including beginning balances, and post the journal entries to those T-accounts on the appropriate line. After all transactions are recorded, compute the balance for each account in the appropriate column.

Cash (A)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Inventories (A)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
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(8)	Answer	Answer
End. Bal.	Answer	Answer

Equipment (A)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Accum. Depreciation (XA)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Depreciation Expense (E)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Prepaid Rent (A)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Rent Expense (E)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Wages Payable (L)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Wages Expense (E)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Sales Revenue (R)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Cost of Goods Sold (E)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Accounts Payable (L)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

Total Equity (SE)
Beg. Bal.	Answer	Answer
(1)	Answer	Answer
(2)	Answer	Answer
(3)	Answer	Answer
(4)	Answer	Answer
(5)	Answer	Answer
(6)	Answer	Answer
(7)	Answer	Answer
(8)	Answer	Answer
End. Bal.	Answer	Answer

(c) Prepare its income statement for 2014, and its balance sheet at December 31, 2014.

Fischer Card Shop Income Statement AnswerFor the Year Ended December 31, 2014December 31, 2014
AnswerEquipmentAccounts PayableRetained EarningsSales RevenueWages PayableWages ExpenseRent ExpenseCost of Goods SoldInventoriesPrepaid RentAccumulated Depr. Equip.CashDepreciation Expense		$Answer
AnswerPrepaid RentWages ExpenseSales RevenueRent ExpenseRetained EarningsEquipmentDepreciation ExpenseAccounts PayableInventoriesCost of Goods SoldWages PayableAccumulated Depr. Equip.Cash		Answer
Gross profit		Answer
Other expenses:
Rent Expense	$Answer
Wages Expense	Answer
Depreciation Expense	Answer
Total other expenses		Answer
Net income		$Answer

Fischer Card Shop Balance Sheet
	2014	2013
Assets:
AnswerRetained EarningsAccounts PayableAccumulated Depr. Equip.InventoriesWages PayableCost of Goods SoldRent ExpenseCashWages ExpenseEquipmentDepreciation ExpenseSales RevenuePrepaid Rent	$Answer	$Answer
Inventories	Answer	Answer
Prepaid rent	Answer	Answer
Total current assets	Answer	Answer
AnswerDepreciation ExpenseCashWages ExpenseWages PayableSales RevenueInventoriesCost of Goods SoldAccounts PayableRetained EarningsEquipmentRent ExpenseAccumulated Depr. Equip.Prepaid Rent	Answer	Answer
Less: Accumulated depreciation	Answer	Answer
Equipment, net	Answer	Answer
Total assets	Answer	Answer
Liabilities and equity:
AnswerDepreciation ExpenseSales RevenueAccounts PayableCost of Goods SoldInventoriesCashWages ExpenseRetained EarningsRent ExpenseAccumulated Depr. Equip.EquipmentWages PayablePrepaid Rent	Answer	Answer
Wages payable	Answer	Answer
Total liabilities	Answer	Answer
Total equity	Answer	Answer
Total liabilities and equity	$Answer	$Answer

d. Prepare entries to close its temporary accounts in journal entry form and post the closing entries to the T-accounts.

General Journal
	Description	Debit	Credit
(7)	AnswerWages PayableEquipmentDepreciation ExpenseAccounts PayableAccumulated Depr. Equip.Cost of Goods SoldInventoriesPrepaid RentWages ExpenseRetained EarningsSales RevenueRent ExpenseCash	Answer	Answer
	AnswerRent ExpenseRetained EarningsEquipmentWages PayableAccumulated Depr. Equip.Prepaid RentWages ExpenseCashSales RevenueAccounts PayableInventoriesDepreciation ExpenseCost of Goods Sold	Answer	Answer
	To close the revenue account.
(8)	AnswerSales RevenueWages ExpenseCost of Goods SoldAccumulated Depr. Equip.Accounts PayableCashDepreciation ExpenseEquipmentInventoriesRetained EarningsRent ExpensePrepaid RentWages Payable	Answer	Answer
	Cost of goods sold	Answer	Answer
	Rent expense	Answer	Answer
	Wages expense	Answer	Answer
	Depreciation expense	Answer	Answer
	To close the expense accounts.