I.

Brief Background of the Case

Save-Mart was a retail store. Likewise any typical retail inventory stores, the account balances
and transactions as of February 28 are followed by a set of adjusting entries at the end of the
accounting period. The effects of theses events are recorded as such to conform and modify the
account balances that will reflect the situation as of the end of the period the way it should be.
II. Statement of the Problem
While the account trial balance as of February 28 were balanced accordingly, the company
seeks to assess the required financial statements with the adjusting entries at the end of the accounting
period.
III. Objectives of the Study
The objective of this study is to create financial statements for the company given the adjusting
entries. To be more specific, the objectives are as follows:
1. To create a journal entry for the adjusting entries to follow the business’s activity.
2. To create T accounts and close entries to track adjustments.
3. To prepare an income statement and balance sheet to reflect on the business’s status.

IV. Analysis and Solution

Journal Entries

T-Tables
Closing Entries

Income Summary
Trial Balance

Financial Statements
V. Conclusion and Recommendations
 Save-Mart has a lot more merchandise inventory and accounts receivable as compared to their
cash. Their greater inventory may mean that they are preparing to stock up their supply for a high
demand season. This could also indicate a lack of demand as compared to supply. Their greater
accounts receivable as compared to cash can mean that they receive more payments through account
rather than cash. This may be problematic due to their money not being guaranteed until they actually
receive the cash from the due accounts.
Save-Mart’s large Cost of Goods Sold is an indicator of Save-Mart’s retail business model.
Retail businesses require inventory to be sold which amounts to lare costs of good sold, which is
which deducts a lot from the revenue. The retail model leads to low gross margins due to selling
products which they stock up on with inventory.
It is recommended that Save-Mart converts more of its assets into cash. This guarantees them
to get cash returns to gain profit from the business. Stocking up on assets such as accounts receivable
will just delay their due payments and won’t be able to grow their business immediately by using cash
to pay for other necessities. Merchandise inventory is the asset that should be managed most due to
their business relying on selling their products to earn revenues. This can lead to over-stocking of
merchandise without being able to sell them all for revenue. It is recommended that Save-Mart find a
right balance of the amount of merchandise to be bought and kept, and eventually sold.