Smith Company for the year ended December 31, has $169,000 recorded in the Debit column and $193,434 in the Credit column on the line for the Income Summary account. What were that beginning and ending balances for Merchandise Inventory?.
To determine the beginning and ending balances for Merchandise Inventory, we need to analyze the given information and understand the flow of transactions in the income statement and balance sheet.
The Income Summary account is an intermediate account that is used to close revenue and expense accounts at the end of the accounting period. The balance in the Debit column of the Income Summary account represents the total of all revenue accounts' debit balances, while the balance in the Credit column represents the total of all expense accounts' credit balances.
In this case, we have $169,000 recorded in the Debit column and $193,434 in the Credit column of the Income Summary account. This means that there is a net credit balance of $193,434 - $169,000 = $24,434 in the Income Summary account. This net credit balance indicates that the company had more expenses than revenues for the year.
Since the Income Summary account is an intermediate account and has nothing to do directly with the Merchandise Inventory, we need to look for other accounts in the balance sheet that are linked to Merchandise Inventory. Typically, these accounts include Purchases, Sales, and Cost of Goods Sold.
To determine the beginning and ending balances for Merchandise Inventory, we need additional information. Specifically, we need to know the following:
1. Beginning balance of Merchandise Inventory: This can usually be found in the opening balances or the beginning of the year balance sheet.
2. Purchases of Merchandise Inventory during the year: This represents the additional inventory acquired during the year and can be found in the Purchases account.
3. Sales of Merchandise Inventory during the year: This represents the inventory sold during the year and can be found in the Sales account.
4. Cost of Goods Sold (COGS): This represents the cost of the inventory that was sold during the year and can be calculated using the formula: Beginning Inventory + Purchases - Ending Inventory = COGS.
Without the additional information mentioned above, it is not possible to determine the beginning and ending balances for Merchandise Inventory. However, by following the steps outlined above and examining the relevant accounts, you should be able to find the necessary figures to calculate the balances.