NICANOR Trading

Worksheet
December 31,2019

Unadjusted Trial Balance Adjustments INCOME STATEMENT

Debit Credit Debit Credit Debit
Cash in bank 200,000
Cash on hand 90,000
Accounts receivable 334,000
Allowance for doubtful accounts 12,000 5,500
Notes receivable 110,000
Merchandise inventory 280,000 280,000
Supplies inventory 34,000 12,000
Prepaid advertising 30,000 16,000
Store furniture and fixtures 220,000
Accumulated depreciation-store furniture 20,000 8,000
Office equipment 190,000
Accumulated depreciation- Office equipment 20,000 10,000
Accounts payable 189,000
Notes payable 140,000
Interest payable 26,000
Bank loan payable 350,000
Nicanor, capital 700,000
Nicanor, Drawing 50,000
Sales 1,200,000
Sales discounts 14,000 14,000
Sales returns 18,000 18,000
Purchases 920,000 920,000
Freight in 17,000 17,000
Purchase discounts 18,000
Purchase returns 15,000
Salaries and wages 70,000 9,000 79,000
Freight out 5,000 5,000
Rent expense 45,000 7,000 38,000
Insurance expense 20,000 3,000 17,000
Light and water expense 8,000 8,000
Taxes and licenses 6,000 6,000
Travelling expense 14,000 14,000
Interest expense 15,000 4,500 10,500
Totals 2,690,000 2,690,000
ADJUSTMENTS:
Merchandise inventory end
Doubtful Accounts 5,500 5,500
Advertising expense 16,000 16,000
Depreciation Expense 18,000 18,000
Prepaid rent 7,000
Prepaid insurance 3,000
Salaries payable 9,000
Prepaid interest 4,500
Supplies expense 12,000 12,000
Totals 75,000 75,000 1,478,000
Net Profit 335,000
Totals 1,813,000

Adjusting Entries: e. Prepaid rent 7,000.00

a. Merchandise inventory on December 31,2015 , 580,000 Rent expense
b. Doubtful accounts 5,500
Allowance for doubtful accounts 5,500 f. Prepaid insurance 3,000.00
Insurance expense
c. Advertising expense 16,000 g. Salaries and wages 9000
Prepaid advertising 16,000 Salaries and wages payable
h. Prepaid interest 4,500.00
d. Depreciation Expense 18,000.00 Interest expense
Accumulated depreciaiton- Store furniture & Fixtures 8,000
Accumulated depreciation - Office equipment 10,000

Required:
1. Using the above adjusting entries complete the 8 column worksheet presented above ( 30 pts)
2. Prepare Income Statement , Balance Sheet and Statement of Changs in Equity ( 25 pts)
 UNADJUSTED TRIAL BALANCE ADJUSTMENTS FORWARD
DEBIT DEBIT ADD = DEBIT
CREDIT CREDIT ADD = CREDIT
COME STATEMENT BALANCE SHEET DEBIT CREDIT DEDUCT = HIGHER VALUE
Credit Debit Credit CREDIT DEBIT DEDUCT = HIGHER VALUE
200,000
90,000
334,000
17,500
110,000 BALANCE SHEET
NORMAL BALANCE
22,000 ASSETS DEBIT
14,000 LIABILITIES CREDIT
220,000 CAPITAL CREDIT
28,000 WITHDRAWAL DEBIT
190,000
30,000 INCOME STATEMENT
189,000 NET SALES
140,000 INCOME / REVENUE
26,000 SALES CREDIT
350,000 SALES RETURNS DEBIT
700,000 SALES DISCOUNTS DEBIT
50,000
1,200,000

NET SALES XX
COST OF GOODS SOLD -XX
GROSS PROFIT XX
18,000 EXPENSES -XX
15,000 NET PROFIT XX

580,000 580,000 BALANCE SHEET

NORMAL BALANCE
ASSETS DEBIT
LIABILITIES CREDIT
7,000 CAPITAL CREDIT
3,000 WITHDRAWAL DEBIT
9,000
4,500 INCOME STATEMENT
INCOME / REVENUE
1,813,000 1,824,500 1,489,500 SALES
335,000 SALES RETURNS
1,813,000 1,824,500 1,824,500 SALES DISCOUNTS
NET SALES

7,000 i. Supplies expense

supplies inventory 12,000
12,000
3,000.00

9000

4,500
ADD = CREDIT
DEDUCT = HIGHER VALUE
DEDUCT = HIGHER VALUE

NORMAL BALANCE
CONTRA ASSET CREDIT

TATEMENT INCOME STATEMENT BALANCE SHEET

COST OF GOODS SOLD
MERCHANDISE INVENTORY BEGINNING XX DEBIT
PURCHASES DEBIT
PURCHASE RETURNS CREDIT
PURCHASE DISCOUNTS CREDIT
FREIGHT IN NET PURCHASES XX DEBIT
TOTAL GOODS AVAILABLE FOR SALE XX
MERCHANDISE INVENTORY END -XX CREDIT DEBIT
COST OF GOODS SOLD XX

NORMAL BALANCE
CREDIT
CONTRA ASSET

MERCHANDISE INVENTORY BEGINNING

PURCHASES
PURCHASE RETURNS
PURCHASE DISCOUNTS
FREIGHT IN
MERCHANDISE INVENTORY END
 NICANOR TRADING
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2019

REVENUES:
SALES 1,200,000
LESS: SALES RETURNS 18,000
SALES DISCOUNTS 14,000 32,000
NET SALES 1,168,000
LESS: COST OF GOODS SOLD
MERCHANDISE INVENTORY BEGINNING 280,000
ADD: NET PURCHASES
PURCHASES 920,000
PURCHASE RETURNS - 15,000
PURCHASE DISCOUNTS - 18,000 887,000
FREIGHT IN 17,000
NET PURCHASES 904,000
GOODS AVAILABLE FOR SALE 1,184,000
LESS: MERCHANDISE INVENTORY END - 580,000
COST OF GOODS SOLD 604,000
GROSS PROFIT 564,000
LESS: OPERATING EXPENSES
SALARIES AND WAGES 79,000
FREIGHT OUT 5,000
RENT EXPENSE 38,000
INSURANCE EXPENSE 17,000
LIGHT AND WATER EXPENSE 8,000
TAXES AN LICENSES 6,000
TRAVELLING EXPENSE 14,000
INTEREST EXPENSE 10,500
DOUBTFUL ACCOUNTS 5,500
ADVERTISING EXPENSE 16,000
DEPRECIATION EXPENSE 18,000
SUPPLIES EXPENSE 12,000 229,000
NET PROFIT 335,000
 NICANOR TRADING
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2019

NICANOR, CAPITAL BEGINNING 700,000

ADD: PROFIT 335,000
TOTAL 1,035,000
LESS: WITHDRAWAL 50,000
NICANOR, CAPITAL END 985,000

NICANOR TRADING
BALANCE SHEET
AS OF THE YEAR ENDED DECEMBER 31, 2019

ASSETS:
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS ( NOTE 1) 290,000
TRADE AND OTHER RECEIVABLES ( NOTE 2) 426,500
INVENTORIES ( NOTE 3) 602,000
PREPAID EXPENSES ( NOTE 4) 28,500
TOTAL CURRENT ASSETS 1,347,000
NON-CURRENT ASSETS
PROPERTY PLANT AND EQUIPMENT(NOTE 5) 352,000
TOTAL NON-CURRENT ASSETS 352,000
TOTA ASSETS 1,699,000

LIABILITIES AND OWNER'S EQUITY

LIABILITES
CURRENT LIABILITIES
TRADE AND OTHER PAYABLES ( NOTE 6) 364,000
TOTAL CURRENT LIABILITES 364,000
NON-CURRENT LIABILITIES
BANK LOAN PAYABLE 350,000
TOTAL NON-CURRENT LIABILITIES 350,000
TOTAL LIABILITIES 714,000
OWNER'S EQUITY
NICANOR, CAPITAL END 985,000
TOTAL OWNER'S EQUITY 985,000 -
TOTAL LIABILITIES AND OWNER'S EQUITY 1,699,000
NOTE 1:
CASH AND CASH EQUIVALENTS
Cash in bank 200,000
Cash on hand 90,000
TOTAL 290,000

NOTE 2:
TRADE AND OTHER RECEIVABLES
Accounts receivable 334,000
Allowance for doubtful accounts - 17,500
Notes receivable 110,000
TOTAL 426,500

NOTE 3:
INVENTORIES
Merchandise inventory 580,000
Supplies inventory 22,000
TOTAL 602,000

NOTE 4:
PREPAID EXPENSES
Prepaid advertising 14000
Prepaid rent 7000
Prepaid insurance 3000
Prepaid interest 4500
TOTAL 28500
NOTE 5:
PROPERTY, PLANT AND EQUIPMENT
Store furniture and fixtures 220000
Accumulated depreciation-store furniture -28000
Office equipment 190000
Accumulated depreciation- Office equipme -30000
TOTAL 352000

NOTE: 6
TRADE AND OTHER PAYABLES
Accounts payable 189,000
Notes payable 140,000
salaries payable 9,000
Interest payable 26,000
TOTAL 364,000
Steps in preparing closing entries
1. Close the net sales 2. Close the cost of goods sold
Normal Balance components of cost of goods sold are:
Sales Credit
Sales returns Debit 1 Merchandise inventory beginning
Sales discounts Debit 2 Purchases
3 Purhase returns
4 Purchase discounts
5 Freight in
6 Merchandise inventory end

Explanation:
The purpose of closing entries is to make all temporary or nominal accounts/ income statement accounts at zero balance so, t
make sales account at zero , you debit it in the closing entry while Sales returns and discounts must be credited since their nor
so in the ledger when you post the closing entries the above accounts will have a zero balance.
GENERAL LEDGER / T-ACCOUNTS
Sales
from Closing entry 1,200,000 1,200,000 from journal entry
0

Salse Returns
from Closing entry 18,000 18,000 from journal entry
0

Sales Discounts
14,000 14,000
0
OTHER ACCOUNTS ARE THE SAME AS PRESENTED ABOVE, THEIR BALANCES AFTER CLOSING ENTRIES
WILL BECOME ZERO.
 3. Expenses = Normal Balance is Debit to Close these accounts must be credited

Normal Balance
Debit
Debit
Credit
Credit
Debit
Credit
Note: only in the income statement however, in the balance sheet its normal balance is debit

t accounts at zero balance so, therefore to

must be credited since their normal balance is debit

CLOSING ENTRIES ( CE)

1. Net Sales = Close net sales to income summary
CE#1 Sales 1,200,000
Sales return 18,000
Sales discounts 14,000
Income Summary 1,168,000 This is the amount of net sales reflected in the income statement ( 1,200,000 - 180

2. Cost of Goods Sold = Close cost of goods sold to income summary

CE # 2: Merchandise inventory end 580000
Purchase returns 15000
Purchase discounts 18000
Income Summary 604,000 This is the amount of cost of goods sold reflected in the income statement ( 280,00
Merchandise inventory beg. 280000
Purchases 920000
Freight in 17000

3. Expenses = close to income summary

CE# 3. INCOME SUMMARY 229,000
SALARIES AND WAGES 79,000
FREIGHT OUT 5,000
RENT EXPENSE 38,000
INSURANCE EXPENSE 17,000
LIGHT AND WATER EXPENSE 8,000
TAXES AN LICENSES 6,000
TRAVELLING EXPENSE 14,000
INTEREST EXPENSE 10,500
DOUBTFUL ACCOUNTS 5,500
ADVERTISING EXPENSE 16,000
 DEPRECIATION EXPENSE 18,000
SUPPLIES EXPENSE 12,000

4. Net Profit or Loss = Close the net profit to capital account

First compute the ending balance of income summary account and then close it to capital account
Income summary
CE# 2 604,000 1,168,000 CE#1
CE#3 229,000
833,000 1,168,000
335,000 NET PROFIT REFECLECTED IN THE INCOME STATEMENT = The balance

CE# 4. INCOME SUMMARY 335,000

NICANOR , CAPITAL 335,000

SO AFTER CLOSING THE PROFIT THE BALANCE OF INCOME SUMMARY ACCOUNT IS ZERO.
Income summary
CE# 2 604,000 1,168,000 CE#1
CE#3 229,000 1
CE#4 335,000
1,168,000 1,168,000
0

5. Owner's withdrawal account = Close withdrawal account to Capital Account = The balance of withdrawal is debit thus, to close it you credit it and debit
CE# 5

NICANOR , CAPITAL 50,000

NICANOR, DRAWING 50,000
 4. Profit = When Income summary account is on a credit balance that means there's a profit
however when incoem summary account is on a debit balance that means there's a loss.

So the Closing entry when there's profit

Debit , Income Summary and Credit , Capital Account
If loss: Debit, Capital Accounts and Credit , Income Summary

5. Withdrawal or Drawings = Since Drawing accounts has a debit balance to close it , it must be credited in the clo
it must be credited in the closing entry and debit capital account to decrease the latter.

come statement ( 1,200,000 - 18000 - 14,000)

d in the income statement ( 280,000 + 920,000 + 17,000 - 580,000 - 15,000 - 18,000)

ME STATEMENT = The balance is on the credit thus, to make it zero balance you debit it in the closing entry.

to close it you credit it and debit capital account to decrease the latter.
ns there's a loss.

t must be credited in the closing entry and debit capital account to decrease the latter.
 NICANOR TRADING
POST CLOSING TRIAL BALANCE
FOR THE YEAR ENDED DECEMBER 31, 2019
ACCOUNT TITLES DEBIT CREDIT
Cash in bank 200,000
Cash on hand 90,000
Accounts receivable 334000
Allowance for doubtful accounts 17500
Notes receivable 110000
Merchandise inventory 580,000
Supplies inventory 22,000
Prepaid advertising 14000
Prepaid rent 7000
Prepaid insurance 3000
Prepaid interest 4500
Store furniture and fixtures 220000
Accumulated depreciation-store furniture 28000
Office equipment 190000
Accumulated depreciation- Office equipment 30000
Accounts payable 189000
Notes payable 140000
salaries payable 9000
Interest payable 26000
Bank loan payable 350,000
Nicanor Capital 985000
TOTAL 1,774,500 1,774,500
TOPICS TO BE DISCUSSED ON MONDAY TO WEDNESDAY
REVERSING ENTRIES
ADJUSTING ENTRIES