Question

Financial Statements and Closing Entries

The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2018, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:

The Gorman Group End-of-Period Spreadsheet For the Year Ended October 31, 2018
	Adjusted Trial Balance
Account Title	Dr.	Cr.
Cash	$11,200
Accounts Receivable	24,380
Supplies	3,810
Prepaid Insurance	8,230
Land	87,000
Buildings	312,000
Accumulated Depreciation-Buildings		101,500
Equipment	225,000
Accumulated Depreciation-Equipment		132,200
Accounts Payable		28,840
Salaries Payable		2,860
Unearned Rent		1,300
Common Stock		130,000
Retained Earnings		240,660
Dividends	21,600
Service Fees		411,290
Rent Revenue		4,340
Salaries Expense	294,860
Depreciation Expense-Equipment	16,000
Rent Expense	13,400
Supplies Expense	9,490
Utilities Expense	8,570
Depreciation Expense-Buildings	5,720
Repairs Expense	4,720
Insurance Expense	2,590
Miscellaneous Expense	4,420
	1,052,990	1,052,990

Required:

1. Prepare an income statement.

The Gorman Group Income Statement For the Year Ended October 31, 2018
Revenues:
Total Revenues
Expenses:
Total Expenses
Net income

Prepare a Retained Earnings Statement.

The Gorman Group Retained Earnings Statement For the Year Ended October 31, 2018

Prepare a balance sheet.

The Gorman Group Balance Sheet October 31, 2018
Assets				Liabilities
Current assets:				Current liabilities:
				Total liabilities
Total current assets
Property, plant, and equipment:				Stockholders' Equity
Total property, plant, and equipment				Total stockholders' equity
Total assets				Total liabilities and stockholders' equity

2. Journalize the entries that were required to close the accounts at October 31. For a compound transaction, if a box does not require an entry, leave it blank.

Date	Account	Debit	Credit
2018
Oct. 31 Close revenues
Oct. 31 Close expenses
Oct. 31 Close income/loss
Oct. 31 Close dividends

3. If Retained Earnings had instead decreased $30,300 after the closing entries were posted, and the dividends remained the same, what would have been the amount of net income or net loss? Enter all amounts as positive numbers.
$  

Answer 1

1.

The Gorman Group Income Statement For the year ended October 31, 2018
Revenues
Service Fees	411,290
Rent Revenue	4,340
Total Revenues		415,630
Expenses:
Salaries Expense	294,860
Rent Expense	13,400
Supplies Expense	9,490
Utilities Expense	8,570
Repairs Expense	4,720
Insurance Expense	2,590
Depreciation Expense: Equipment	16,000
Depreciation Expense: Buildings	5,720
Miscellaneous Expense	4,420
Total Expenses		359,770
Net Income		55,860

The Gorman Group Statement of Retained Earnings For the year ended October 31, 2018
Beginning Retained Earnings	$ 240,660
Add: Net Income	55,860
Less: Dividends	(21,600)
Ending Retained Earnings	$ 274,920

The Gorman Group Balance Sheet October 31, 2018
Assets	$	$	Liabilities	$	$
Cash	11,200		Accounts Payable	28,840
Accounts Receivable	24,380		Salaries Payable	2,860
Supplies	3,810		Unearned Rent	1,300
Prepaid Insurance	8,230		Total Current Liabilities		33,000
Total Current Assets		47,620	Total Liabilities		33,000
Property, Plant and Equipment			Stockholders' Equity
Land	87,000		Common Stock	130,000
Buildings	312,000		Retained Earnings	274,920
Less: Accumulated Depreciation	(101,500)				404,920
Equipment	225,000
Less: Accumulated Depreciation	(132,200)
Total Property, Plant and Equipment		390,300
Total Assets		$ 437,920	Total Liabilities and Stockholders Equity		$ 437,920

2. . In the books of the Gorman Group:

Closing Entries:

Date	Account Titles	Debit	Credit
2018		$	$
Oct 31	Service Fees	411,290
	Rent Revenue	4,340
	Income Summary		415,630
	To close revenue accounts
Oct 31	Income Summary	359,770
	Salaries Expense		294,860
	Supplies Expense		9,490
	Rent Expense		13,400
	Utilities Expense		8,570
	Repairs Expense		4,720
	Insurance Expense		2,590
	Depreciation Expense: Equipment		16,000
	Depreciation Expense: Buildings		5,720
	Miscellaneous Expense		4,420
	To close expense accounts
Oct 31	Income Summary	55,860
	Retained Earnings		55,860
	To close income summary
Oct 31	Retained Earnings	21,600
	Dividends		21,600
	To close dividends

3. Net loss : $ ( 8,700)