Practice Work:
1. Adjusting and closing entries.

The following trial balance was taken from the books of Caslup Corporation on December 31, 2010.

Account Debit Credit
Cash $ 40,000
Accounts Receivable 108,000
Note Receivable 8,000
Allowance for Doubtful Accounts $ 1,800
Merchandise Inventory 54,000
Unexpired Insurance 4,800
Furniture and Equipment 138,000
Accumulated Depreciation of F. & E. 15,000
Accounts Payable 10,800
Common Stock 44,000
Retained Earnings 65,000
Sales 410,000
Cost of Goods Sold 128,000
Salaries Expense 53,000
Rent Expense 12,800 Totals $546,600 $546,600
At year end, the following items have not yet been recorded.
a. Insurance expired during the year, $3,000.
b. Estimated bad debts, 1 percent of gross sales.
c. Depreciation on furniture and equipment, 10% per year.
d. Interest at 9 percent is receivable on the note for one full year.
e. Rent paid in advance at December 31, $6,800 (originally charged to expense).
f. Accrued salaries at December 31, $6,200.

Instructions
(a) Prepare the necessary adjusting entries.
(b) Prepare the necessary closing entries.

Solution 1

(a) Adjusting Entries a. Insurance Expense 3,000 Unexpired Insurance 3,000 b. Bad Debt Expense 4,100 Allowance for Doubtful Accounts 4,100 c. Depreciation Expense 13,800 Accumulated Depreciation of F. & E. 13,800 d. Interest Receivable 720 Interest Revenue 720 e. Prepaid Rent 6,800 Rent Expense 6,800 f. Salaries Expense 6,200 Salaries Payable 6,200

(b) Closing Entries Sales 410,000 Interest Revenue 720 Income Summary 410,720

Income Summary 214,100 Salaries Expense 59,200 Rent Expense 6,000 Depreciation Expense 13,800 Bad Debt Expense 4,100 Insurance Expense 3,000 Cost of Goods Sold 128,000

Income