Save-Mart was a retail store. Its account balances on February 28 (the end of its fiscal year), before adjustments, were as shown below.

The data for the adjustments are
1. Cost of merchandise sold, $604,783.
2. Store equipment had a useful life of seven years. (All equipment was less than seven years old.)
3. Supplies inventory, February 28, $3,877. (Purchases of supplies during the year were debited to the Supplies Inventory account.)
4. Expired insurance, $7,125.
5. The note payable was at an interest rate of 9 percent, payable monthly. It had been outstanding throughout the year.
6. Sales salaries earned but not paid to employees, $2,340.
7. The statement sent by the bank, adjusted for checks outstanding, showed a balance of $88,110. The difference represented bank service charges.
Questions
1. Set up T accounts with the balances given above.
2. Journalize and post adjusting entries, adding other T accounts as necessary.
3. Journalize and post closing entries.
4. Prepare an income statement for the year and a balance sheet as of February 28.

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Debit Balances Credit Balances Accumulated depreciation on store equipment 11,420 Cash Accounts receivable Merchandise inventory Store equipment Supplies inventory Prepaid insurance Selling expense Sales salaries Miscellaneous general expense Sales discounts Interest expense Social Security tax expense $ 88,860 127,430 903,130 70,970 17,480 12,430 10,880 47,140 18,930 3,340 7,100 3,400 $1,311,090 Notes payable Accounts payable Common stock Retained earnings Sales 88,500 88,970 100,000 33,500 988,700 Total Total $1,311,090