Problem 5-4A

Adjusting entries and multi-step income statementperpetual

CHECK FIGURES: 1. Income statement columns = $529,310;

2. Profit = $5,025

Information from the unadjusted trial balance of Jumbo's on December 31, 2017, the end of the annual accounting period, is as follows:

		Debit	Credit
Cash		8,100
Accounts receivable		22,665
Merchandise inventory		34,600
Store supplies		2,415
Office supplies		775
Prepaid insurance		3,255
Equipment		74,490
Accumulated depreciation, equipment			13,655
Accounts payable			8,000
Salaries payable			0.0
Sally Fowler, capital			168,965
Sally Fowler, withdrawals		62,000
Interest income			310
Sales			529,000
Sales returns and allowances		5,670
Cost of goods sold		381,160
Salaries Expense		96,300
Rent expense		29,100
Supplies Expense		0.0
Depreciation expense, equipment		0.0
Insurance expense		0.0
Totals		719,930	719,930

Required

1. Record adjusting entries for the following in format.

a. A review of the store supplies on December 31, 2017, revealed a balance on hand of $2,000; a similar examination of the office supplies showed that $640 had been used.

b. The balance in the Prepaid Insurance account was reviewed and it was determined that $255 was unused at December 31, 2017.

c. The records show that the equipment was estimated to have a total estimated useful life of 10 years with a resale value at the end of its life of $14,490.

d. Accrued salaries payable, $1,800.

e. A count of the merchandise inventory revealed a balance on hand

December 31, 2017, of $33,800.

2. Using adjusted trial balance numbers, prepare multiple-step income statement showing the expenses in detail.

Analysis Component:

Explain why Interest income is shown under Other revenues and expenses on the multiple-step income statement.