Nix’It Company’s ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix’It uses the perpetual inventory system). Merchandise inventory $ 44,800 Sales returns and allowances $ 5,100 Retained earnings 129,300 Cost of goods sold 109,200 Dividends 7,000 Depreciation expense 11,700 Sales 161,600 Salaries expense 39,500 Sales discounts 4,300 Miscellaneous expenses 5,000 A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $42,950.Prepare journal entries to close the balances in temporary revenue and expense accounts. Remember to consider the entry for shrinkage.

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andromache andromache · Answer 1 · 2020-10-11T17:43:09+02:00

Answer and Explanation:

The Journal entries are shown below:-

1. Sales Dr, $161,600

To Income summary $161,600

(Being To close a temporary account with credit balances is recorded)

2. Income summary Dr, $176,650

To Sales discount $4,300

To Sales return and allowance $5,100

To Cost of good sold $111,050

To Depreciation expenses $11,700

To Salaries expenses $39,500

To Miscellaneous expenses $5,000

(Being to close a temporary account with a debit balance is recorded)

Working note:-

shrinkage based on physical count = $44,800 - $42,950

= $1,850

Cost of good sold = $109,200 + $1,850

= $111,050