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Marjorie Morada Management Accounting

Prof. Armando B. Bo

Case 4-2 Save Mart Data for adjusments:

1. Cost of merchandise sold $604,783

Cash (1) 604,783

Sales Revenue (1) 604,783

2. Store equipment had a useful life of seven years (all equipment was less than seven years old)

Cash (1) 604,783 (2) 11,420 Equipment at Cost (2) 11,420

3. Supplies inventory, February 28, $3, 877 (Purchases of supplies during the year were debited to the Supplies Inventory account)

Inventory (3) 21,357

Accounts Payable (3)21,357

4. Expired insurance 7,125

Cash (1) 604,783 (2) 11,420 (4) 5,305 Insurance Expense (4) 5,305

Marjorie Morada Management Accounting

Prof. Armando B. Bo

5. The note payable was at an interest rate of 9 percent, payable monthly. It had been outstanding throughout the year

Cash (1) 604,783 (2)11,420 (4) 5,305 (5)88,500 Notes Payable (5) 88,500

6. Sales Salaries earned but not paid to employees, $2,340


Cash (1)604,783 (2) 11,420 (4) 5,305 (5) 88,500 (6) 2,340 Wages Expense (6) 2,340

7. The statement sent by thr bank , adjusted for checks outstanding showed a balance of $88,110. The difference represented bank service charges.

Cash (1) 604,783 (2) 11,420 (4) 5,305 (5) 88,500 (6) 2,340 (7)390 Bank service charge expense (7) 390

Marjorie Morada Management Accounting Journal Entries Save-Mart

Prof. Armando B. Bo

Entry Number (1)

Account Cash Sales Revenue Equipment Cash Inventory Accounts Payable Insurance expense Cash Note payable Cash Wages expense Cash Bank service charge Cash

Dr. 604,783

Cr.

604,78 11,420 11,420 21,357 21,357 5,305 5,305 88,500 88,500 2,340 2,340 390 390

(2)

(3)

(4)

(5)

(6)

(7)

Closing Journal Entries: Account Titles Sales Revenue Income Statement To close revenue accounts Income Summary Equipment expense Utilities expense Insurance expense Interest expense Wages expense Bank service charge To close expense accounts 129,312 11,420 21,357 5,305 88,500 2,340 390 604,783 604,783

(1)

(2)

Marjorie Morada Management Accounting Save-Mart Balance Sheet As of February 28 Assets Current Assets Cash A/R Mdse.Invty. Supplies Invty. Prepaid Insce. Selling expense Sales salaries Sales discount Interest expense 88,860 127,430 903,130 17,480 12,430 10,880 47,140 3,340 7,100 1,217,790

Prof. Armando B. Bo

Liabilities & Owners Equity Current Liabilities: Notes payable Accounts payable TOTAL CURRENT LIAB. 88,500 88,970 177,470

Non-Current Liab. Common Stock Retained Earnings Other non-current TOTAL NON CURRENT LIAB 100,000 33,500 988,700 1,122,200

TOTAL CURRENT ASSETS Non-Current: Store Equip Acc. Dep. Other non-current assets Misc. Gen, expense Social security tax Expense TOTAL ASSETS 18,930 3,400 70,970 (11,420)

59,550

22,330 1,299,670 TOTAL LIABILITIES 1,299,670

Marjorie Morada Management Accounting Save-Mart Income Statement As of February 28

Prof. Armando B. Bo

Sales Cost of Sales Gross Margin Expenses: Selling expense Sales salaries Misc.Gen. expense Interest expense Income before tax Tax expense NET INCOME 10,880 47,140 18,930 7,100

988,700 (3,340) 985,360

84,050 901,310 3,400 897,910

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