Problem 20-8 Preparing Adjusting and Closing Entries In the middle of the end-of-period activities, the accountant for Buzz Newsstand was called away because of an illness in the family. Before leaving, the accountant prepared the work sheet and the financial statements. However, the business manager can locate only the Trial Balance shown here (before adjustments) and the Income Statement 4.690 Buzz Newsstand Trial Balance, Before Adjustments December 31, 20-- Cash in Bank 12,035 Accounts Receivable 6,106 Merchandise Inventory 64.800 Supplies 3,916 Prepaid Insurance 5,400 Delivery Truck 46,106 Accounts Payable Fed. Corp. Income Tax Pay. Sales Tax Payable Capital Stock Retained Earnings Income Summary Sales Sales Returns and Allowances 9,500 Purchases 168,624 Transportation in 8,236 Purchases Discounts Purchases Returns and Allowances Advertising Expense 4,000 Fed. Corp. Income Tax Expense 12,500 Insurance Expense Miscellaneous Expense 1,600 Salaries Expense 26,900 Supplies Expense Utilities Expense 4,200 416 40.000 24,603 299,156 2.950 2.108 Totals 373,923 373.923 Buzz Newsstand Buzz Newsstand Income Statement Before Adjustments December 31, 20- Revenue: Sales Less: Sales Ret. and Alow. 299, 156 9,500 289,656 Net Sales Cost of Merch. Sold: Merch. Inv., Jan 1, 20-- Purchases Plus: Transportation In 64,800 168,624 8,236 176,860 Cost of Del. Merch. Less: Purch. Discounts Purch. Ret. and Allow. 2.950 2.108 5.058 171.802 Net Purchases Cost of Merch. Avail. Merch. Inv., Dec 31, 20-- 236,602 60.400 176,202 Cost of Merch. Sold 113,454 Gross Profit on Sales Operating Expenses: Advertising Expense Insurance Expense Miscellaneous Expense Salaries Expense Supplies Expense Utilities Expense 4.000 1.800 1,600 26.900 2.744 4200 41 244 Total Oper. Expenses 72,210 14,918 Operating Income Less: Fed. Inc. Tax Exp 57 297 Net Income Net Income 57,297 1. Record the adjusting and closing entries in the general journal. View transaction list Journal entry worksheet 1 2 3 4 5 6 7 > Record the adjusting entry for merchandise inventory. Note: Enter debits before credits Date General Journal Debit Credit Dec. 31 Record entry Cloor entry View general Journal 2. Prepare a Post-Closing Trial Balance. The totals will be automatically calculated. Buzz Newsstand Post-Closing Trial Balance December 31, 20- 0 Totals 3. Determine the impact of these adjusting entries on net income. (This item will be manually graded by your teacher.)