Question

The trial balance of Bellemy Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year.

BELLEMY FASHION CENTER TRIAL BALANCE NOVEMBER 30, 2017
	Debit	Credit
Cash	\( 28,700
Accounts Receivable	33,700
Inventory	45,000
Supplies	5,500
Equipment	133,000
Accumulated Depreciation—Equipment		\) 24,000
Notes Payable		51,000
Accounts Payable		48,500
Common Stock		90,000
Retained Earnings		8,000
Sales Revenue		757,200
Sales Returns and Allowances	4,200
Cost of Goods Sold	495,400
Salaries and Wages Expense	140,000
Advertising Expense	26,400
Utilities Expenses	14,000
Maintenance and Repairs Expense	12,100
Delivery Expense	16,700
Rent Expense	24,000
	\(978,700	\)978,700

Adjustment data:

1. Supplies on hand total \(1,500.

2. Depreciation is \)15,000 on the equipment.

3. Interest of \(11,000 is accrued on notes payable at November 30.

Other data:

1. Salaries expense is 70% selling and 30% administrative.

2. Rent expense and utilities expenses are 80% selling and 20% administrative.

3. Notes payable worth \)30,000 are due for payment next year.

4. Maintenance and repairs expense is 100% administrative.

Instructions

(a) Journalize the adjusting entries.

(b) Prepare an adjusted trial balance.

(c) Prepare a multiple-step income statement and retained earnings statement for the year and a classified balance sheet as of November 30, 2017.

(d) Journalize the closing entries.

(e) Prepare a post-closing trial balance.

Short answer

a) Adjusting entries are recorded in Step 2.

b) Adjusted trial balance shows, total debits and credits equals $1,004,700.

c) Income statement, statement of retained earnings and balance sheet are prepared in Step 4.

d) Closing entries are recorded in Step 5.

e) Post-closing trial balance shows total debits and credits equal $241,900.

Step-by-step solution

Meaning of trial balance

A worksheet used in bookkeeping is the trial balance. In this, each record’s balance is included to form aggregates for the credit and debit account columns that are always equal.

(a) Preparing journal entries

Date	Particulars	Debit ($)	Credit ($)
Nov. 30	Supplies expense	4,000
	Supplies		4,000
	($5,500 - $1,500)
30	Depreciation expense	15,000
	Accumulated depreciation- equipment		15,000
30	Interest expense	11,000
	Interest payable		11,000

(b) Preparing an adjusted trial balance

BELLEMY FASHION CENTER TRIAL BALANCE NOVEMBER 30, 2017
	Debit	Credit
Cash	$ 28,700
Accounts Receivable	33,700
Inventory	45,000
Supplies ($5,500-$4,000)	1,500
Equipment	133,000
Accumulated Depreciation—Equipment($24,000+$15,000)		$ 39,000
Notes Payable		51,000
Accounts Payable		48,500
Common Stock		90,000
Retained Earnings		8,000
Interest payable		11,000
Sales Revenue		757,200
Sales Returns and Allowances	4,200
Cost of Goods Sold	495,400
Salaries and Wages Expense	140,000
Advertising Expense	26,400
Utilities Expenses	14,000
Maintenance and Repairs Expense	12,100
Delivery Expense	16,700
Rent Expense	24,000
Supplies expense	4,000
Depreciation expense	$15,000
Interest expense	$11,000
Total	$1,004,700	$1,004,700

(c) Preparing Income Statement

BELLEMY FASHION CENTERE Income Statement NOVEMBER 30, 2017
Sales revenue
Sales	$757,200
Less: Sales return and allowances	4,200
Net sales	753,000
Cost of goods sold	495,400
Gross profit	257,600
Operating expense
Selling expenses
Salaries and wages expense ($140,000 x 70%) $98,000
Advertising expense 26,400
Rent expense ($24,000 x 80%)19,200
Delivery expense 16,700
Utilities expense ($14,000 x 80%)11,200
Depreciation expense 15,000
Supplies expense 4,000
$190,500
Administrative expenses
Salaries and wages expense ($140,000 x30%) $42,000
Maintenance and repairs expense 12,100
Rent expense ($24,000 x 80%)4,800
Utilities expenses ($14,000 x 80 2,800
Total administrative expenses 61,700
Total operating expense	252,200
Income from operations	$5,400
Other expenses and losses:
Interest expense	11,000
Net loss	($5,600)

BELLEMY FASHION CENTERE Retained Earnings NOVEMBER 30, 2017
Retained earnings, December 1, 2016	$8,000
Less: Net loss	5,600
Retained earnings, November 30, 2017	$2,400

BELLEMY FASHION CENTERE Balance sheet NOVEMBER 30, 2017
Assets
Current asset
Cash $28,700
Account receivable 33,700
Inventory 45,000
Supplies 1,500
Total current assets	$108,900
Property, plant, and equipment
Equipment 133,000
Accumulated depreciation-equipment 39,000	94,000
Total assets	$202,900
Liabilities and Stockholder’s equity
Current liabilities
Notes payable due next year $30,000
Accounts payable 48,500
Interest payable 11,000
Total current liabilities	$89,500
Long-term liabilities
Notes payable ($51,000 - $30,000)	21,000
Toral liabilities	110,500
Stockholder’s equity
Common stock 90,000
Retained earnings2,400	92,400
Total liabilities and stockholders’ equity	$202,900

(d) Preparing closing journal entries

Date	Particulars	Debit ($)	Credit ($)
Nov. 30	Sales revenue	757,200
	Income Summary		757,200
30	Income Summary	762,800
	Sales returns and allowance		4,200
	Cost of goods sold		495,400
	Salaries and wages expense		140,000
	Advertising expense		26,400
	Utility expense		14,000
	Maintenance and repair expense		12,100
	Delivery expense		16,700
	Rent expense		24,000
	Supplies expense		4,000
	Depreciation expense		15,000
	Interest expense		11,000
30	Retained earnings	5,600
	Income Summary ($757,200-$762,800)		5,600

(e) Preparing a post-closing trial balance

BELLEMY FASHION CENTER Post-Closing TRIAL BALANCE NOVEMBER 30, 2017
	Debit	Credit
Cash	$ 28,700
Accounts Receivable	33,700
Inventory	45,000
Supplies ($5,500-$4,000)	1,500
Equipment	133,000
Accumulated Depreciation—Equipment		$ 39,000
Notes Payable		51,000
Accounts Payable		48,500
Interest payable		11,000
Common Stock		90,000
Retained Earnings		2,400
	$241,900	$241,900