Chapter 5, Problem 10PA

2. Net income, $185,000

Appendix 2

PR 5-10A Periodic inventory accounts, multiple-step income statement, closing entries

On December 31, 20Y5, the balances of the accounts appearing in the ledger of Wyman Company are as follows:

Instructions

1. Does Wyman Company use a periodic or perpetual inventory system? Explain.

2. Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 20Y5. The inventory as of December 31, 20Y5, was $305,000. The estimated cost of customer returns inventory for December 31, 20Y5, is estimated to increase to $40,000.

3. Prepare the closing entries for Wyman Company as of December 31, 20Y5.

4. What would be the net income if the perpetual inventory system had been used?