1. Preparing a Worksheet for a Merchandise Company
Chapter 11

2. Figuring adjustments for merchandise inventory, unearned
Learning Objective 1
Figuring adjustments for
merchandise inventory, unearned
rent, supplies used, insurance
expired, depreciation expense,
and salaries accrued.

3. Learning Unit 11-1 (Adjusting for Merchandise Inventory)
Periodic Inventory System
Beginning inventory
Net purchases +
Freight-in +
Ending inventory – =
Cost of goods sold

4. Learning Unit 11-1 (Adjusting for Merchandise Inventory)
What are some adjustments
for merchandise inventory?
Credit Beginning Inventory to remove
this “old” inventory balance.
Debit Ending Inventory for the counted
and priced amount to leave this
balance in the Inventory account.
This is the balance that will
be on the balance sheet.

5. Learning Unit 11-1 (Adjusting for Merchandise Inventory)
Adjustment 19,000
Balance 19,000
Adjustment 4,000
Adjustment 4,000
Income Summary

6. Learning Unit 11-1 (Adjusting for Merchandise Inventory)
First Month
BALANCE SHEET
Assets
Beginning inventory
$19,000 (assume sold)
INCOME STATEMENT
Cost of goods sold
Beginning inventory $19,000
Less ending inventory $ 4,000
Second Month
BALANCE SHEET
Assets
Beginning inventory
$4,000

7. Learning Unit 11-1 (Adjusting for Unearned Rent)
Suppose that Art’s received $600 in advance
for renting a room to Jesse for three months.
Is the $600 considered rental revenue?
No. Unearned Rent is a liability account.
This account is used to record rent payments
received from renters in advance.

8. Learning Unit 11-1 (Adjusting for Unearned Rent)
The rent will not be earned
until the months have gone by.
The rental money will be recorded as revenue
only after the unit is used for each month.
What accounts will be affected
at the end of the month?
Unearned Rent and Revenue

9. Preparing a worksheet for
Learning Objective 2
Preparing a worksheet for
a merchandise company.

10. Learning Unit 11-2 (Completing the Worksheet)
Mortgage Payable
Interest Expense
Unearned Revenue

11. Learning Unit 11-2 (Completing the Worksheet)
Rental Income Earned
Unearned Rent
200
600
400
Rental Income
200
Balances on
adjusted
trial balance

12. Learning Unit 11-2 (Completing the Worksheet)
Adjustment for Rental Income
Accounts Affected Category Rules
Unearned Rent Liability Dr. 200
Rental Income Revenue Cr. 200

13. Learning Unit 11-2 (Completing the Worksheet)
Adjustment for Supplies
Accounts Affected Category Rules
Supplies Expense Expense Dr. 500
Supplies Asset Cr. 500

14. Learning Unit 11-2 (Completing the Worksheet)
Adjustment for Insurance Expired
Accounts Affected Category Rules
Insurance Expense Expense Dr. 300
Prepaid Insurance Asset Cr. 300

15. Learning Unit 11-2 (Completing the Worksheet)
Adjustment for Salaries Accrued
Accounts Affected Category Rules
Salaries Expense Expense Dr. 600
Salaries Payable Liability Cr. 600

16. Learning Unit 11-2 (Completing the Worksheet)
The worksheet provides the information
needed to prepare the expanded income
statement needed for a merchandising company.

17. Learning Unit 11-2 (Completing the Worksheet)
The income statement columns balance with
a net income if the columns must
have a debit entry to balance them.
The income statement columns
balance with a net loss if the columns
must have a credit entry to balance.

18. Worksheet Example Account Title Adjusted Trial Balance Dr. Cr. Income
Statement
Balance
Sheet
Cash
Mdse. Inventory
Receivables
Supplies
Equipment
Accounts Payable
Capital
Sales
Sales Returns
Purchases
Purchases Returns
Totals
4,065
1,850
200
100
1,200
1,205
8,820
320
5,000
3,450 50
1,405
3,500
7,415
5,320
2,095
Net income

19. Returns and allowances – 200
Worksheet Example
Sales revenue $3,450
Sales discounts
Returns and allowances – 200
Net sales revenue $3,250
Cost of goods sold –1,155
Gross profit $2,095

20. Worksheet Example
Gross Profit –
Operating Expenses =
Net Income

21. Perpetual Inventory The Purchases account, Purchases Returns
and Allowance account, and the Purchases
Discount account are not used.
Merchandise Inventory is debited
when purchases are made.

22. Perpetual Inventory Merchandise Inventory is
credited when sales are made.
Merchandise Inventory is credited for
any discounts, returns, or allowances.

23. End of Chapter 11