Problem on insurance expense and utilities expense


Case Scenario:

Gitler Department Store is located near the Village shopping mall.  At the end of the company’s year on December 31, 2002, the following accounts appeared in two of its trial balances.

                                           Unadjusted      Adjusted                                            Unadjusted    Adjusted            

Accounts Payable                  $  79,300        $  79,300     Interest Payable                                     $  8,000

Accounts Receivable                  50,300            50,300     Interest Revenue                $  4,000      $   4,000

Accumulated Depr.- Bdlg            42,100           52,500     Merchandise Inventory           75,000          75,000

Accumulated Depr.- Equip.          29,600           42,900     Mortgage Payable                   80,000         80,000

Building                                    190,000         190,000     Office Salaries Expense           32,000         32,000

Cash                                          23,000           23,000      Prepaid Insurance                  9,600           2,400

Common Stock                          110,000         110,000      Property Taxes Expenses                           4,800

Cost of Goods Sold                     412,700          412,700      Property Taxes Payable                            4,800

Depr. Expense- Bdlg.                                       10,400      Retained Earnings                  66,600          66,600

Depr. Expense- Equip.                                      13,300     Sales Salaries Expense            76,000          76,000

Dividends                                   28,000             28,000     Sales                                   628,000         628,000

Equipment                                110,000           110,000     Sales Commissions Ex.            11,000           15,500

Insurance Expense                                              7,200     Sales Commissions Payable                         4,500

Interest Expense                          3,000             11,000     Sales Returns & Allowances        8,000            8,000

                                                                                          Utilities Expense                    11,000          11,000


Analysis reveals the following additional data.

1. Insurance expense and utilities expense are 60% selling and 40% administrative.

2. $20,000 of the mortgage payable is due for payment next year.

3. Depreciation on the building and property tax expense are administrative expenses; depreciation On the equipment is a selling expense.

• Prepare a multiple-step income statement, a retained earnings statement, a classified balance sheet.
• Journalize the adjusting entries that were made.
• Journalize the closing entries that are necessary.

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Accounting Basics: Problem on insurance expense and utilities expense
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