Chapter 14, Problem 1MP

John Neff owns and operates Waikiki Surf Shop. A year-end trial balance is provided on page 561. Year-end adjustment data for the Waikiki Surf Shop are shown below.

Neff uses the periodic inventory system. Year-end adjustment data are as follows:

(a, b)    A physical count shows that merchandise inventory costing $51,800 is on hand as of December 31, 20--.

(c, d, e)    Neff estimates that customers will be granted $2,000 in refunds of this year’s sales next year and the merchandise expected to be returned will have a cost of $1,200.

(f)    Supplies remaining at the end of the year, $600.

(g)    Unexpired insurance on December 31, $2,600.

(h)    Depreciation expense on the building for 20--, $5,000.

(i)    Depreciation expense on the store equipment for 20--, $3,000.

(j)    Wages earned but not paid as of December 31, $1,800.

(k)    Neff also offers boat rentals which clients pay for in advance. Unearned boat rental revenue as of December 31 is $3,000.

Required

1. 1. Prepare a year-end spreadsheet.
2. 2. Journalize the adjusting entries.
3. 3. Compute cost of goods sold using the spreadsheet prepared for part (1).