Question

The following list includes selected permanent accounts and all of the temporary accounts from the December 31, 2017, unadjusted trial balance of Emiko Co. Use these account balances along with the additional information to journalize (a) adjusting entries and (b) closing entries. Emiko Co. uses a perpetual inventory system.

	Debit	Credit
Merchandise inventory	\(30,000
Prepaid selling expenses	5,600
Dividends	33,000
Sales		\)529,000
Sales return and allowances	17,500
Sales discount	5,000
Cost of goods sold	212,000
Sales salaries expenses	48,000
Utilities expenses	15,000
Selling expenses	36,000
Administrative expenses	105,000

Additional Information

Accrued sales salaries amount to \(1,700. Prepaid selling expenses of \)3,000 have expired. A physical count of year-end merchandise inventory shows $28,700 of goods still available.

Short answer

Answer

1. Both debit and credit sides of the journal amount to$6,000 each.
2. Both debit and credit sides of the journal amount to$1,091,000 each.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of retained earnings

Retained earnings can be defined as the portion of net income that is kept aside for reinvestment or for making dividend payments in the future.

Adjusting entries

Date	Accounts and Explanation	Debit $	Credit $
Dec. 31, 2017	Salaries expenses	$1,700
	Salaries payable		$1,700
Dec. 31, 2017	Selling expenses	3,000
	Prepaid selling expenses		3,000
Dec. 31, 2017	Cost of goods sold	1,300
	Merchandise inventory		1,300
		$6,000	$6,000

Closing entries

Date	Accounts and Explanation	Debit $	Credit $
Dec. 31, 2017	Income summary	$444,500
	Cost of goods sold		$213,300
	Sales return and allowance		17,500
	Sales discount		5,000
	Sales salaries expenses		49,700
	Utilities expenses		15,000
	Selling expenses		39,000
	Administrative expenses		105,000
Dec. 31, 2017	Sales	529,000
	Income summary		529,000
Dec. 31, 2017	Income summary	84,500
	Retained earnings		84,500
Dec. 31, 2017	Retained earnings	33,000
	Withdrawal		33,000
		$1,091,000	$1,091,000