Question

The Game Place is a retail store that sells computer games, owned by Matt Huffman. On December 31, 2016, the firm’s general ledger contained the accounts and balances below. All account balances are normal.
Cash ...................... 34,465
Accounts Receivable ............... 1,669
Prepaid Advertising ............... 480
Supplies ................... 425
Merchandise Inventory ............. 18,500
Store Equipment ................. 30,000
Accumulated Depreciation—Store Equipment ...... 3,000
Office Equipment ............... 4,800
Accumulated Depreciation—Office Equipment .... 1,500
Notes Payable, due 2017 ............. 22,500
Accounts Payable ............... 5,725
Wages Payable
Social Security Tax Payable
Medicare Tax Payable
Unearned Seminar Fees ............. 7,500
Interest Payable
Matt Huffman, Capital ............. 43,000
Matt Huffman, Drawing .............. 18,000
Income Summary
Sales ..................... 163,660
Sales Discounts ................ 180
Seminar Fee Income
Purchases ................... 92,500
Purchases Returns and Allowances ......... 770
Freight In ................... 275
Rent Expense .................. 26,400
Wages Expense ................ 18,000
Payroll Taxes Expense ............. 1,811
Depreciation Expense—Store Equipment
Depreciation Expense—Office Equipment
Advertising Expense
Supplies Expense
Interest Expense ................ 150

INSTRUCTIONS
1. Prepare the Trial Balance section of a 10-column worksheet. The worksheet covers the year ended December 31, 2016.
2. Enter the adjustments below in the Adjustments section of the worksheet. Identify each adjustment with the appropriate letter.
3. Complete the worksheet.
ADJUSTMENTS
a.–b. Merchandise inventory at December 31, 2016, was counted, and determined to be $21,200.
c. The amount recorded as prepaid advertising represents $480 paid on September 1, 2016, for six months of advertising.
d. The amount of supplies on hand at December 31 was $125.
e. Depreciation on store equipment was $4,500 for 2016.
f. Depreciation on office equipment was $1,500 for 2016.
g. Unearned seminar fees represents $7,500 received on November 1, 2016, for five seminars.
At December 31, three of these seminars had been conducted.
h. Wages owed but not paid at December 31 were $800.
i. On December 31, 2016, the firm owed the employer’s social security tax ($49.60) and Medicare tax ($11.60).
j. The note payable bears interest at 8% per annum. One month interest is owed at December 31, 2016.

Analyze:
How did the balance of merchandise inventory change during the year ended December 31, 2016?



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  • CreatedAugust 08, 2014
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