Question

Selected balance sheet information for the Wolf Company at November 30, and December 31, 2021, is presented below. The company uses the perpetual inventory system and all sales to customers are made on credit.
Nov. 30 Dec. 31
Debits Credits Debits Credits
Accounts receivable 9,800 2,800
Prepaid insurance 4,800 7,300
Inventory 6,800 5,800
Accounts payable 11,800 14,800
Salaries payable 4,800 2,800

The following cash flow information also is available:

a. Cash collected from credit customers, $78,000.
b. Cash paid for insurance, $4,800.
c. Cash paid to suppliers of inventory, $58,000 (the entire accounts payable amounts relate to inventory purchases).
d. Cash paid to employees for salaries, $9,800.

Required:
a. Determine the following for the month of December 2.
b. Prepare summary journal entries to record the month's sales and cost of those sales.

Answer 1

Solution :

a). The sales revenue

Closing balance                                         2800

Add:cash collected from the customer   78,000

Less:opening balance                               (9800)

Sales revenue                                            71000

b). Cost of the goods sold

Cash pf payment for the purchase                                  58,000

Add:decrease in the inventory (6800-5800)                      1000

Add:increase in the account payable (14,800-11,800)        3000

Cost of the good sold                                                        62000

c). The insurance expenses  = (4800 + 4800 - 7300) = 2300

d). the salaries and the wages expenses = 2800 + 9800 - 4800  

                                                                    = 7800

Journal entry

Accounts                                                            Debit              Credit

Income summary account

sales revenue account

Cost of the goods sold                                      62000

insurance expenses                                           2300

Salaries & wages expenses                               7800

Income summary account                                                      72100