Presented below is the December 31 trial balance of New York Boutique.

P-10 Presented below is the December 31 trial balance of New York Boutique.

NEW YORK BOUTIQUE
TRIAL BALANCE
DECEMBER 31

Debit

Credit

Cash

$18,500

Accounts Receivable

32,000

Allowance for Doubtful Accounts

$700.00

Inventory, December 31

80,000

Prepaid Insurance

$5,100

Equipment

84,000

Accumulated Depreciation—Equipment

35,000

Notes Payable

28,000

Common Stock

80,600

Retained Earnings

$10,000

Sales Revenue

$600,000

Cost of Goods Sold

408,000

Salaries and Wages Expense (sales)

50,000

Advertising Expense

6,700

Salaries and Wages Expense (administrative)

65,000

Supplies Expense

5,000

$754,300

$754,300

Instructions

(a) Construct T-accounts and enter the balances shown.

(b) Prepare adjusting journal entries for the following and post to the T-accounts. (Omit explanations.) Open additional T-accounts as necessary. (The books are closed yearly on December 31.)

(1) Bad debt expense is estimated to be $1,400.

(2) Equipment is depreciated based on a 7-year life (no salvage value).

(3) Insurance expired during the year $2,550.

(4) Interest accrued on notes payable $3,360.

(5) Sales salaries and wages earned but not paid $2,400.

(6) Advertising paid in advance $700.

(7) Office supplies on hand $1,500, charged to Supplies Expense when purchased.

(c) Prepare closing entries and post to the accounts.

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