Reference no: EM13517328

I.  Adjusting entries

The following transactions pertain to the 1989 accounting period of Bailwick Company.

A.Mar. 1  Received $3,000 of rent for one year paid in advance by tenant.

B.June 1  Paid $1,000 to a television station for commercials that will be run evenly over two years, beginning on July 1, 1989

C.Aug. 1  Paid $1,920 for a four-year fire insurance policy.

D.Dec. 1  Received $1,680 from customers representing subscriptions paid in advance for two years.

II. Statements     

The following account balances were taken from the records of Brooks Company on December 31, 1989.  Each account has a normal balance.

Merchandise Inventory, Jan.l, 1989................... $12,000

Sales Discounts......................................   5,000

Transportation-in....................................  10,000

Purchases............................................  56,000

Sales Allowances.....................................   2,000

Purchase Discounts...................................   1,000

Sales Returns........................................   9,000

Purchase Returns.....................................   3,000

Transportation-out...................................   6,000

Sales................................................ l00,000

Purchase Returns and Allowances......................   4,000

A physical count showed that merchandise inventory costing $18,000 was on hand on December 31, 1989.

Instructions:

1.  Prepare, in good form, the cost of goods sold section of the income statement. (note: you will be graded on form as well as math) 

2.  Calculate gross profit for 1989.(in good form)

III.  Reversing entries

State briefly the two rules pertaining to reversing entries, i.e. when are reversing entries required?