Chapter 3: Question 5BE (page 128)
BE3-5 (L02,3) Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.
The amount of prepaid insurance used is $150,000.
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(a) How are the components of revenues and expenses different for a merchandising company? (b) Explain the income measurement process for a merchandising company.
BE3-13 (L08) Assume that Best Buy made a December 31 adjusting entry to debit Salaries and Wages Expense and credit Salaries and Wages Payable for \(4,200 for one of its departments. On January 2, Best Buy paid the weekly payroll of \)7,000. Prepare Best Buy’s (a) January 1 reversing entry; (b) January 2 entry (assuming the reversing entry was prepared); and (c) January 2 entry (assuming the reversing entry was not prepared).
Is it necessary that a trial balance be taken periodically? What purpose does it serve?
BE3-9 (L03) Prepare the following adjusting entries at August 31 for Walgreens. (a) Interest on notes payable of \(300 is accrued. (b) Services performed but unbilled total \)1,400. (c) Salaries and wages earned by employees of \(700 have not been recorded. (d) Bad debt expense for year is \)900. Use the following account titles: Service Revenue, Accounts Receivable, Interest Expense, Interest Payable, Salaries and Wages Expense, Salaries and Wages Payable, Allowance for Doubtful Accounts, and Bad Debt Expense.
(LO5) (Closing Entries) Presented below is information related to Gonzales Corporation for the month of January 2017.
Cost of Goods sold \( 208,000 Salaries and wages expenses \)61,000
Delivery expenses \( 7,000 Sales discounts \) 8,000
Insurance expenses \( 12,000 Sales returns and allowances \)13,000
Rent expenses \( 20,000 Sales revenue \)350,000
Instructions:
Prepare the necessary closing entries.
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