The following trial balance was taken from the books of Thomas J. Howe at the close of the next fiscal year.
Thomas J. Howe
Trial Balance, June 30, 1914
| Cash | $ 894.00 | |
| Notes Receivable | 5,000.00 | |
| Accounts Receivable | 18,000.00 | |
| Thomas J. Howe, Capital | 6,000.00 | |
| Thomas J. Howe, Drawing | 560.00 | |
| Notes Payable | 3,000.00 | |
| Accounts Payable | 15,640.00 | |
| Purchases | 77,100.00 | |
| Sales | 93,620.00 | |
| Merchandise Inventory, June 30, 1913 | 5,641.00 | |
| Purchase Discounts | 743.00 | |
| Sales Discounts | 1,420.00 | |
| Freight Inward | 2,884.00 | |
| Insurance | 300.00 | |
| Interest Earned | 146.00 | |
| Returned Sales | 930.00 | |
| Returned Purchases | 760.00 | |
| Furniture and Fixtures | 2,000.00 | |
| Horses, Wagons, and Harness | 1,200.00 | |
| Rent | 1,500.00 | |
| Advertising | 300.00 | |
| Expense | 180.00 | |
| Salaries | 1,600.00 | |
| Commissions Paid on Sales | 400.00 | |
| $119,909.00 | $119,909.00 |
At this date, you will find that the following items must be considered to determine the financial condition of Mr. Howe: Merchandise inventory $2,470; insurance unexpired $100; interest accrued on notes receivable $66; interest accrued on notes payable $30; he owes for two months’ rent $300.
1% of net sales is to be set aside as a reserve for uncollectible accounts. Furniture and fixtures are to be written off in the amount of 10%. Provide for a reserve of 10% for depreciation of horses, wagons, and harness.
Advertising carried forward to the next period $75; unused stationery and other expense items $42; commissions on sales due but unpaid $90.
(a) Prepare the working sheet.
(b) Construct the balance sheet as of June 30, 1914.
(c) Prepare profit and loss statement—percentages based on net sales.
(d) Write the adjusting and closing journal entries.