Problem 5-4A Adjusting entries and multi-step income statementperpetual LO5

CHECK FIGURES: 2. Profit = $4,855

Information from the unadjusted trial balance of Electric Bike on December 31, 2020, the end of the annual accounting period, is as follows:

	Debit	Credit
Cash ..........................................................	$ 8,200
Accounts receivable ..................................	22,765
Merchandise inventory .............................	34,700
Store supplies ............................................	2,465
Office supplies ..........................................	785
Prepaid insurance ......................................	3,355
Equipment .................................................	75,590
Accumulated depreciation, equipment .....		$ 13,755
Accounts payable ......................................		8,100
Salaries payable ........................................		-0-
Braeden Li, capital ....................................		170,715
Braeden Li, withdrawals ...........................	62,500
Interest income .........................................		320
Sales ..........................................................		529,500
Sales returns and allowances ....................	5,170
Cost of goods sold ....................................	381,260
Salaries expense ........................................	96,400
Rent expense .............................................	29,200
Supplies expense .......................................	-0-
Depreciation expense, equipment .............	-0-
Insurance expense .....................................	-0-
Totals ........................................................	$722,390	$722,390

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Required

1. Record adjusting entries for the following information.

   1. 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 $14,590.

   2. The balance in the Prepaid Insurance account was reviewed and it was determined that $260 was unused at December 31, 2020.

   3. A review of the store supplies on December 31, 2020, revealed a balance on hand of $2,030; a similar examination of the office supplies showed that $645 had been used.

   4. Accrued salaries payable, $1,850.

   5. A count of the merchandise inventory revealed a balance on hand December 31, 2020, of $33,890.

2. Using adjusted trial balance numbers, prepare a 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.