This problem uses both the income statement (statement of earnings) and the balance sheet of Gildan Activewear Inc. that appear in Appendix A at the end of this book and on MyAccountingLab. It will aid your understanding of the closing process of a business that has inventory.
1. Journalize Gildan's closing entries for the year ended October 2, 2011, to the line Earnings (loss) before income taxes. You will be unfamiliar with certain expenses, but you should treat them all similarly. Instead of closing to a Capital account, close to the Retained Earnings account (since Gildan is a corporation, not a proprietorship).
2. What amount was closed to Retained Earnings? What were dividends in 2011?
3. Gildan is a marketer but also a manufacturer of quality basic apparel. On the balance sheet, the company reports an inventory figure and the detail is provided in the notes to the financial statements. What amounts are shown on the balance sheets for the Inventory account for October 2, 2011, and October 3, 2010? Of these amounts, how much is raw materials in 2010 and 2011? How much is finished goods and work in process in 2010 and 2011?