Question

Blossom Company had the following account balances at year-end: Cost of Goods Sold $62,050; Inventory $14,310; Operating Expenses $29,590; Sales Revenue $127,880; Sales Discounts $1,110; and Sales Returns and Allowances $1,900. A physical count of inventory determines that merchandise inventory on hand is $12,550.
Required:
a. Prepare the adjusting entry necessary as a result of the physical count.
1. Account Titles and Explanation
Debit Credit
2. Account Tiles and Explanation
Debit Credit

Answer 1

Answer:

     Account Titles and Explanation            Debit        Credit

(a)  Cost of Goods Sold($14,310-$12,550)$1,760

     Inventory                                                              $1,760

(b) Sales Revenue                                      $127,880

Income Summary                                                      $127,880

Income Summary                                       $96,410

Cost of Goods Sold ($62,050 + $1,760)                  $63810

Operating Expenses                                                 $29,590

Sales Returns and Allowances                                 $1,900

Sales Discounts                                                         $1,110

Income Summary ($127,880 – $96,410) $31,470

Owner’s Capital.                                                        $31,470

Explanation:

The difference of Closing book value and physical count is charges to the cost of goods sole.

All the revenue and Expenses account are closed in Income summary account.

Balance in the Income summary account after posting all adjustments is transferred to owner's capital account