one WORKSHEET OF MERCHANDISING 11.5 Business Afer all adjusting entries have been posted to the ledger, the bookkeeper usually prepares financial statements. Often times, the bookkeeper uses (WAKER to facilitate easily the Preparation of financial statements. A worksheet is a very important and effective tool used by Accountants in their various tasks. ‘The Worksheet of almerehandisig biSineSW is similar in almost all aspects with a service “entity, except for the merchandising accounts. Hence, a merchandising worksheet may have eight or ten columns also, The different sections in the worksheet will depend upon the needs of the Users. The use of worksheet, however, is optional. But for beginners in the field of accounting, itis ‘highly suggested to use a worksheet in preparing the financial statements. In this introductory course in accounting, the financial statements prepared include only the following: 1. statement of comprehensive income 2. statement of changes in owner's equity 3. statement of financial position Extension of Accounts The process of extending the various accounts starts from the adjusted tial balance, in extending the accounts, the basic rue are: ee 1. Alrel accouns are extended tothe section of statment of financial postion.“ “Fas 2 Allnominal accounts are extended to the section of statement of comprehensive income, = Where shall merchondising account be extended? Incase the business is using the periodic inventory system, the following procedures may be adopted: 1, All merchandising accounts, except Merchandise inventory end, are extended to the column of comprehensive income only. 2. Merchandise inventory end is extended as follows: to the credit side of the column ‘comprehensive income, and at the same time to the debit side of the column Financial position. Worksheet of Merchandising Business 485, gees:Incase thebusiness is using the perpetual inventory system, there are only twomerchand accounts used to record the sale-purchase and related transactions, These account merchandise inventory and cost of sales. The following procedures may be adopted: 1. Extend Merchandise inventory account to the column of financial position. Extend Cost of sales account to the column of comprehensive income. ‘The unadjusted trial balance of IZZY Enterprises as of December 31, 2016 apes! follows: Cash 42,300 ‘Accounts receivable 68,000 Allowance for doubtful accounts 6000 Merchandise inventory 30,000 Prepaid rent 7,200 Store furniture 25,000 ‘Accumulated depreciation - Store 2,500 ‘Accounts payable 58,500 Izzy, Capital 132,500 Izzy, Drawing 22,500 sales 140,000 Sales returns and allowances 10,000 Purchases 120,000 Freightin 3,000 Purchase returns and allowances 11,500 Salaries and wages 16,000 Store supplies expenses 4,000 Utilities expense Totals 351,000 _351,000 Additional information: Qridemter- 1. Doubtful account is 3% of net sales. The estimated life of store furniture is 10 years without scrap value. Prepaid rentas of December 31 is 2,400. Unused store supplies, 300 viewed AA Aécrued salaries, 3,200 Ending merchandise inventory, 58,000 en eep 486 ADJUSTING ENTRIES AND WORKSHEETRequired: 1. Prepare adjusting entries in a two-column general journal. 2. Prepare a 10-column worksheet with the following sections: trial balance, adjustment, adjusted trial balance, comprehensive income, and financial position, ‘Answer 1: The adjusting entries appears follows: Clute Yo record doubtful accounts Doubiful accounts 3.900 Allowance for doubtful accounts 3.900 (F'140,000- 10,000) x39 = 3.900 ‘8Mfo record depreciation expense Depreciation expense 2,500 Accumulated depreciation ~ Store equipment 2,500 25,000/10 =P 2,500 | €To record rent expense Rent expense 4,800 4.800 7.200 -F 2,404 AYfo record unused store supplies Unused store supplies 300 Store supplies expense 300 ¢)To record unpaid salaries Salaries and wages 3.200 Salaries payable 3200 -f)To adjust the inventory ~ Closing of beginning inventory Income and expense summary account'°™* 30,000 Merchandise inventory 30,000 Merchandise inventory 58,000 Income and expense summary account‘The business is using the periodic inventory system, the trial balance other than Merchandise inventory account: ‘Answer 2: The 10-column worksheet appears as follow [ZY Enterprises ‘Worksheet December 31,2018, ince: there are merchandise accounts Trial Batanes | Adjustments Aesouni Ties ole] ol o [basr 42305) 2230] Taczouris receivable 8,009 8,000] [a fordoubifl accounts B00] 300 [Merchandise inveniony | 90 ‘31009] Press rot 7200 0200 Ste ease 70 7.003 [ass Depocaton Fr 2509 5000 : Jpcrunts pvebe sai 3 sy, Conia rae ree | xy. rave asx 50 | [sales 1404 40 000] | Sse roars &stowanoes | 7000 oo) / acres a0 09 2a | Freanen 2.009 3003 Pera Tours & ao a rise Salroserdwages | 16000 aaoo]__| vaaoe Bre spp exons | 4000 32] 3700 ates e=rse co 3.009 = soo a0 Nertandes mverion.nd <0 cc esresmon omenee 2.09 ent eperse 409 | 6 Honowea soe sites 00 | 3 lente pope sai | fess Terme red i Netinoare [ott 488 ADJUSTING ENTRIES AND WORKSHEETIe can be observed chat merchandlsng inventory endit [2 SP ANH {8 te aut column, but extended directly to the credit side of comprehensive income column and to the debit ' side of financial position column, eta ie {In case the business adopts the perpetual inventory system, there is a slight variation in the worksheet, since there are only two merchandising accounts that will appear in the column of comprehensive income. These accounts are Sales and Cost of sles. j LHYZEL Merchandising uses the perpetual inventory system. The unadjusted trail balance a of December 31, 2016 appears as follows: Cash 45,000 | Accounts receivable 68,000 | Allowance for doubtful accounts. 6,000 ‘Merchandise inventory 50,000 Prepaid rent 7.200 Store furniture 30,000 ‘Accumulated depreciation - Store 1500 ‘Accounts payable 58,500 Hyzel, Capital 127,200 Hyzel, Drawing 20,000 Sales 205,000 Sales returns and allowances 8,000 Cost of sales 125,000 Salaries and wages 16,000 ‘Advertising expense 18,000 Store supplies expenses 5,000 Usilties expense 6,000 398,200 Totals Additional information: 1. Doubtful account is 2% of net sales. “The estimated life of store furniture is 10 years without scrap value. Prepaid rent as of December 31 is F 3,000. Prepaid advertising, 3,000 ‘Unused store supplies, P1,200 ‘Accrued salaries, 4,000 Ending merchandise inventory based on physical cou 60,000. aah een st, 56,000; Net realizable value isRequired: 1. Prepare the necessary adjusting entries in a two-column general journal. 2. Prepare a 10-column worksheet. mnomrsitestusigemsare — RG ‘To record doubtful accounts Doubtful accounts 3,940 Allowance for doubtful accounts 3.940 (205,000 - 8,000) «8% = 39,000 ‘Torecord deprecation expense Depreciation expense 3,000 ‘Accumulated depreciation ~ Store equipment 3000 P30,000/1 ‘To record rent expense Rent expense 4200 Prepaid rent 4200 ‘7,200 -73,000=F4,200 ‘Torecord prepald advertising Prepaid advertising 3,000 ‘Advertising expense 3,000 ‘To record unused store supplies Unused store supplies 1,200 ‘Store supplies expense 1,200 ‘To record unpaid salaries’ Salaries and wages 4,000 Salaries payable 4,000 To adjust the ending inventory Merchandise inventory 6,000 Cost of sales 6,000 490 ADJUSTING ENTRIES AND WORKSHEETa Crluncer- rhe account cost of sales in the trial balance signifies that the business is using the perpetual inventory system, The 10-column worksheet appears as follows: TYZEL Merchandising ‘Werkaheet December 31,2016 Tereamce | Adueinenn | AtuciaTal | Gompaterebe [Fearon or [= apo po | o 2.06 Tao} 8,000) 35,00) 00] oo 7200] 3000) 30000) 30.000) adjusted merchandise inventory account is adjusted ‘to the column offinancal position. The cst ofsales takes the place ofthe following accounts purchases, Freight-in, Purchase discounts, Purchase returns, and Allowsnces In the perpetual inventory system, the ‘This text is adopting the periodic inventory system. Hence, exercises and problems unless ise indicated shall be handled using the periodic inventory approach. Worksheet of Merchandising Business 491 ace