Chapter 7
Inventory: Merchandising Transactions
199
Part 2
Below is the adjusted trial balance for George’s Gardening Supplies at the end of the year.
George's Gardening Supplies
Adjusted Trial Balance
December 31, 2016
Account Titles
DR
CR
Cash
$54,830
Accounts Receivable
33,500
Inventory
33,440
Prepaid Insurance
3,600
Equipment
45,000
Accumulated Depreciation
$5,000
Accounts Payable
10,000
Bank Loan
30,000
Gregg, Capital
90,000
Gregg, Drawings
5,000
Sales Revenue
113,500
Interest Revenue
6,500
Sales Returns & Allowances
1,000
Sales Discounts
1,580
Cost of Goods Sold
44,700
Depreciation Expense
5,000
Insurance Expense
2,500
Interest Expense
2,600
Rent Expense
6,000
Salaries Expense
11,000
Supplies Expense
4,500
Utilities Expense
750
Total
$255,000 $255,000
Note: $10,000 of the bank loan will be paid by December 31, 2017.
Required
a) Prepare a single-step income statement for George’s Gardening Supplies for the year ended
December 31, 2016.
b) Prepare a multistep income statement for George’s Gardening Supplies for the year ended
December 31, 2016. Calculate the gross margin percentage.
c) Prepare a classified multistep income statement for George’s Gardening Supplies for the year
ended December 31, 2016 using the following information
• The equipment is used solely for selling purposes.
• Supplies are used for administrative purposes only.
• Insurance, salaries, rent, and utilities are allocated 85% to selling and 15% to
administration.
