Juan Morales Company had the following account balances at year-end: Cost of Goods Sold $60,870; Inventory $18,070; Operating Expenses $32,660; Sales Revenue $123,390; Sales Discounts $1,030; and Sales Returns and Allowances $1,930. A physical count of inventory determines that merchandise inventory on hand is $12,840.

Prepare closing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit To close accounts with debit balances)

Under the periodic system the cost of goods sold is not recorded.

This is a perpetual inventory system.

                Account Titles and Explanation              Debit            Credit

1           Merchandise Inventory                          $ 5590

                Cost of goods Sold                                                  $ 5590

Excess of ending inventory ( 18070-12840=) $5590 adjusting entry

2                 Sales                                           $123,390

                          Income Summary                                           $ 123,390

Closing entry

3                 Income Summary                      $96490      

                   Sales Discounts                                                   $ 1030

                   Sales Return and Allowances                             $ 1930

                  Cost of Goods Sold                                              $ 60,870

                   Operating Expenses                                             $ 32,660

Closing entry