SUMMARY INFORMATION BACKGROUND Rubys Jewelry was incorporate

SUMMARY INFORMATION BACKGROUND: Ruby\'s Jewelry was incorporated on January 1, 2010 with 20,000 shares of S1 par value common stock authorized. All 20,000 shares have been issued. The company\'s accounting period ends on December 31 of each year ACCOUNTING POLICIES: The company uses the following generally accepted accounting principles in presenting financial information: 1. 2. 3. INVENTORY VALUATION- First-in, first-out method on a perpetual basis. Physical counts are conducted at the end of the year to determine the quantity and value of merchandise inventory on hand. DEPRECIATION- Straight-line. a. b. As of the close of business on November 30, 2017, the company had the following trial balance: Ruby\'s Jewelry Post-Closing Trial Balance As of November 30, 2017 Acct Account Title Credit Debit $ 360,000 $ 294,270 S 640,500 $ 760,000 1110 Cash 1120 Accounts Receivable 1130 Merchandise Inventory 1230 Equipment 1231 Accumulated Depreciation- Equipment 2110 Accounts Payable 2210 Income Tax Payable 3010 Common Stock ($1 Par) 3020 Paid-In Capital in Excess of Par 3030 Income Summary 3040 Retained Earnings 4010 Sales Revenue 5020 Cost of Goods Sold 6010 Salaries& Wages Expense 6060 Telephone & Utility Expense 6070 Rent Expense 6120 Depreciation Expense- Equipment 6410 Income Tax Expense s 239,400 432,000 20,000 $ 899,750 S 60,250 $ 5,053,000 $ 2,765,650 $ 1,502.480 S 169.000 $ 212,500 Total S 6,704,400 S 6,704.400

Solution

1) Here the trial balance is prepared till Nov 30th and the value of merchandise inventory is $ 640500 according to it. Also as it is visible from the transaction of December, the purchase was made for $200500 and sales costing $190000 was done.That leaves a final inventory to $ 651000 ($640500+$10500).

Now the physical count was found to be $ 646000 which means there is a difference of $ 5000 (shortage)

Entry :

Merchandise inventory over & short Dr $5000

To Merchandise Inventory Cr $5000

2) The cost of equipment is $760000

Now the method is straight line method (SLM)

Useful life of asset = 20 years

Salvage = 10% of Original cost

Depreciation = (cost- salvage)/life

= ($760000-$76000)/20

= $34200

Entry: Depreciation Account Dr . $34200

To Accumulated Depreciation . $34200

3) The entry to record income tax of $148000

  

Income Tax Account . Dr . $148000

To Income Tax Payable. Cr . $148000