Whatnots is a retail seller of cards, novelty items, and business products. On December 31, 20X1, the firm’s general ledger contained the following accounts and balances.
1. Prepare the Trial Balance section of a 10-column worksheet. The worksheet covers the year ended December 31, 20X1.
2. Enter the adjustments in the Adjustments section of the worksheet. Identify each adjustment with the appropriate letter.
3. Complete the worksheet.
Note: This problem will be required to complete Problem 13.4B in Chapter 13.
ACCOUNTS AND BALANCES
ADJUSTMENTS a.–b. Merchandise inventory on hand on December 31 is $15,840. c. During 20X1, the firm had net credit sales of $160,000. Past experience indicates that 0.8 percent of these sales should result in uncollectible accounts. d. On December 31, an inventory of supplies showed that items costing $245 were on hand. e. On July 1, 20X1, the firm purchased a one-year insurance policy for $2,400. f. Three years ago the firm purchased store equipment for $6,000. The equipment was estimated to have a five-year useful life and a salvage value of $1,000. g. Three years ago the firm purchased store fixtures for $15,760. At the time of the purchase, the fixtures were assumed to have a useful life of seven years and a salvage value of $1,410. h. On October 1, 20X1, the firm issued a six-month, $4,000 note payable at 9 percent interest with a local bank. i. At year-end (December 31, 20X1), the firm owed salaries of $1,450 that will not be paid until January 20X2. j. On December 31, 20X1, the firm owed the employer’s social security tax (assume 6.2 percent) and Medicare tax (assume 1.45 percent) on the entire $1,450 of accrued wages. k. On December 31, 20X1, the firm owed federal unemployment tax (assume 0.6 percent) and state unemployment tax (assume 5.0 percent) on the entire $1,450 of accrued wages. Analyze: After all adjustments have been recorded, what is the net book value of the company’s assets?