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Homework answers / question archive / Nix'It Company's ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix'It uses the perpetual inventory system)

Nix'It Company's ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix'It uses the perpetual inventory system)

Finance

Nix'It Company's ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix'It uses the perpetual inventory system).

    

                Merchandise inventory  $  46,800     Sales returns and allowances $   4,700    Retained earnings   $133,300    Cost of goods sold  $ 110,400    Dividends   7,000    Depreciation expense   12,100    Sales   163,600    Salaries expense   4,700    Sales discounts   $41,500    Miscellaneous expenses   5,000         A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $44,750.

      

Prepare journal entries to close the balances in temporary revenue and expense accounts. Remember to consider the entry for shrinkage.

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Journal Entries:    
Date Account Titles and Explanations Debit Credit
Jul-31 Sales 1,63,600  
  Income Summary   1,63,600
  (To close the revenue accounts)    
Jul-31 Income Summary 1,80,450  
  Sales discounts   4,700
  Sales returns and allowances   4,700
  Cost of goods sold (110,400+(46800-44750))   1,12,450
  Depreciation expense   12,100
  Salaries expense   41,500
  Miscellaneous expense   5,000
  (To close the expense accounts)    
Jul-31 Retained Earnings (180,450-161,600) 16,850  
  Income Summary   16,850
  (To close the income summary account)    
Jul-31 Retained Earnings 7,000  
  Dividends   7,000
  (To close the dividends account)    

 

Journal Entry:    
Date Account Titles and Explanations Debit Credit
Jul-31 Cost of goods sold (46,800-44,750) 2,050  
  Merchandise Inventory   2,050
  (To record the adjusting entry for shrinkage of inventory)    

 

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