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Critical Thinking Problem 12.1 Completing the Worksheet
 
Following is the unadjusted trial balance of Ben’s Jewelers on December 31, 2019.
 

BEN’S JEWELERS Trial Balance December 31, 2019
Cash	$	13,050		Dr.
Accounts Receivable		49,900		Dr.
Allowance for Doubtful Accounts		2,000		Cr.
Merchandise Inventory		105,900		Dr.
Store Supplies		4,230		Dr.
Office Supplies		2,950		Dr.
Store Equipment		113,590		Dr.
Accumulated Depreciation—Store Equipment		13,010		Cr.
Office Equipment		27,640		Dr.
Accumulated Depreciation—Office Equipment		4,930		Cr.
Accounts Payable		4,390		Cr.
Salaries Payable
Social Security Tax Payable
Medicare Tax Payable
Federal Unemployment Tax Payable
State Unemployment Tax Payable
Ben Waites, Capital		166,310		Cr.
Ben Waites, Drawing		30,000		Dr.
Income Summary
Sales		862,230		Cr.
Sales Returns and Allowances		7,580		Dr.
Purchases		504,810		Dr.
Purchases Returns and Allowances		4,240		Cr.
Purchases Discounts		10,770		Cr.
Freight In		7,000		Dr.
Salaries Expense—Sales		75,950		Dr.
Rent Expense		35,500		Dr.
Advertising Expense		12,300		Dr.
Store Supplies Expense
Depreciation Expense—Store Equipment
Salaries Expense—Office		77,480		Dr.
Payroll Taxes Expense
Uncollectible Accounts Expense
Office Supplies Expense
Depreciation Expense—Office Equipment

 
Required:
Complete the worksheet.
a.–b. Ending merchandise inventory, $98,700.
Uncollectible accounts expense, $1,000.
Store supplies on hand December 31, 2019, $625.
Office supplies on hand December 31, 2019, $305.
Depreciation on store equipment, $11,360.
Depreciation on office equipment, $3,300.
Accrued sales salaries, $4,000, and accrued office salaries, $1,000.
Social security tax on accrued salaries, $326; Medicare tax on accrued salaries, $76. (Assumes that tax rates have increased.)
Federal unemployment tax on accrued salaries, $56; state unemployment tax on accrued salaries, $270.
Journalize the adjusting entries on December 31, 2019.
Journalize the closing entries on December 31, 2019.
Compute the following:
Net sales
Net delivered cost of purchases
Cost of goods sold
Net income or net loss
Balance of Ben Waites, Capital on December 31, 2019.

Analyze:
What change(s) to Ben Waites, Capital will be reported on the statement of owner’s equity?
 
Complete the worksheet. (Enter both the debit and credit effects wherever required.)
 


Journalize the adjusting entries on December 31, 2019.

 
Journalize the closing entries on December 31, 2019.
 

Compute net sales.

 
Compute the net delivered cost of purchases.
 

 
Compute the cost of goods sold.
 

Indicate the amount of net income or loss.

Compute the balance of Ben Waites, Capital on December 31, 2019.
 

 
What change(s) to Ben Waites, Capital will be reported on the statement of owner’s equity?
 

   
Critical Thinking Problem 12.2 Net Profit
 
When Sara Yu’s father died suddenly, Sara had just completed the semester in college, so she stepped in to run the family business,
AAA Couriers, until it could be sold. Under her father’s direction, the company was a successful operation and provided ample money
to meet the family’s needs.

Sara was majoring in biology in college and knew little about business or accounting, but she was eager to do a good job of running
the business so it would command a good selling price. Since all of the services performed were paid in cash, Sara figured that she
would do all right as long as the Cash account increased. Thus, she was delighted to watch the cash balance increase from $24,800
at the beginning of the first month to $63,028 at the end of the second month—an increase of $38,228 during the two months she
had been in charge. When she was presented an income statement for the two months by the company’s bookkeeper, she could not
understand why it did not show that amount as income but instead reported only $21,100 as net income.

Knowing that you are taking an accounting class, Sara brings the income statement, shown below, to you and asks if you can help her understand the difference.

 

AAA COURIERS Income Statement Months of June and July, 2019
Operating Revenues
Delivery Fees				$	205,018
Operating Expenses
Salaries and Related Taxes	$	128,224
Gasoline and Oil		31,000
Repairs Expense		6,570
Supplies Expense		2,268
Insurance Expense		2,856
Depreciation Expense		13,000
Total Operating Expense					183,918
Net Income				$	21,100

In addition, Sara permits you to examine the accounting records, which show that the balance of Salaries Payable was $2,680
at the beginning of the first month but had increased to $4,240 at the end of the second month. Most of the balance in the
Insurance Expense account reflects monthly insurance payments covering only one month each. However, the Prepaid Insurance
account had decreased $300 during the two months, and all supplies had been purchased before Sara took over.
The balances of the company’s other asset and liability accounts showed no changes.

Required:
2. Prepare a schedule that accounts for the difference between the increase in the Cash account balance and the net income for the two months.