periodic inventory accounts, multiple-step income statement, closing entries
On June 30, 2016, the balances of the accounts appearing in the ledger of Simkins Company are as follows:
|
Cash |
$ 125,000 |
Purchases |
$4,100,000 |
|
Accounts Receivable |
340,000 |
Purchases Returns and Allowances |
32,000 |
|
Merchandise Inventory, July 1, 2015 |
415,000 |
Purchases Discounts |
13,000 |
|
Office Supplies |
9,000 |
Freight In |
45,000 |
|
Prepaid Insurance |
18,000 |
Sales Salaries Expense |
580,000 |
|
Land |
300,000 |
Advertising Expense |
315,000 |
|
Store Equipment |
550,000 |
Delivery Expense |
18,000 |
|
Accumulated Depreciation— |
Depreciation Expense— |
||
|
Store Equipment |
190,000 |
Store Equipment |
12,000 |
|
Office Equipment |
250,000 |
Miscellaneous Selling Expense |
28,000 |
|
Accumulated Depreciation— |
Office Salaries Expense |
375,000 |
|
|
Office Equipment |
110,000 |
Rent Expense |
43,000 |
|
Accounts Payable |
85,000 |
Insurance Expense |
17,000 |
|
Salaries Payable |
9,000 |
Office Supplies Expense |
5,000 |
|
Unearned Rent |
6,000 |
Depreciation Expense— |
|
|
Notes Payable |
50,000 |
Office Equipment |
4,000 |
|
Common Stock |
300,000 |
Miscellaneous Administrative Expense |
16,000 |
|
Retained Earnings |
525,000 |
Rent Revenue |
32,500 |
|
Dividends |
275,000 |
Interest Expense |
2,500 |
|
Sales |
6,590,000 |
Instructions
1. Does Simkins Company use a periodic or perpetual inventory system? Explain.
2. Prepare a multiple-step income statement for Simkins Company for the year ended June 30, 2016. The merchandise inventory as of June 30, 2016, was $508,000.
3. Prepare the closing entries for Simkins Company as of June 30, 2016.
4. What would be the net income if the perpetual inventory system had been used?
