Nix’It Company’s ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix’It uses the perpetual inventory system).
Merchandise inventory $ 37,800
Sales returns and allowances $ 6,500
T. Nix, Capital 115,300
Cost of goods sold 105,000
T. Nix, Withdrawals 7,000
Depreciation expense 10,300
Sales 160,200
Salaries expense 32,500
Sales discounts 4,700
Miscellaneous expenses 5,000
A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $35,900.
Required:
1. Prepare journal entries to close the balances in temporary revenue and expense accounts. Remember to consider the entry for shrinkage.