The Game Place is a retail store that sells computer games, owned by Matt Huffman. On December 31, 2019, 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 2020 ...................................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, 2019.

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, 2019, was counted and determined to be $21,200.

c. The amount recorded as prepaid advertising represents $480 paid on September 1, 2019, 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 2019.

f. Depreciation on office equipment was $1,500 for 2019.

g. Unearned seminar fees represent $7,500 received on November 1, 2019, 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, 2019, the firm owed the employer's social security tax ($49.60) and

Medicare tax ($11.60).

j. The note payable bears interest at 8 percent per annum. One month's interest is owed at

December 31, 2016.

Analyze: How did the balance of merchandise inventory change during the year ended December 31, 2019?