Question

 

The year-end adjusted trial balance of the Corporation included the following account balances:

Retained earnings	$325,000
Service revenue	741,000
Salaries expense	396,000
Rent expense	27,000
Interest expense	5,000
Dividends	200,000

Prepare the closing entries.

34. $________   In preparing the closing entries for the temporary accounts, how much should Retained earnings be credited?

35. $________   In preparing the closing entries for the temporary accounts, how much should Retained earnings be debited?

36. $_________ After closing the accounts, what is the ending balance in Retained Earnings?

Answer 1

Preparing Closing Entries:-

Corporation

General Journal

No.	Accounts Title and Explanation	Debit	Credit
1.	Service Revenue	$741,000
	Income Summary		$741,000
	(To close Revenue Account)
2.	Income Summary	$428,000
	Salaries Expense		$396,000
	Rent Expense		$27,000
	Interest Expense		$5,000
	(To close Expenses Accounts)
3.	Income Summary	$313,000
	Retained Earnings		$313,000
	(To close Income Summary)
4.	Retained Earnings	$200,000
	Dividends		$200,000
	(To close Dividends Account)

34. In preparing the closing entries for the temporary accounts, Retained Earnings should be credited with The Amount of Net Income.

Calculations for Net Income:-

Net Income=(Revenue- Expenses)

=(Service Revenue-(Salaries Expense+Rent Expense+Interest Expense))

=($741,000-($396,000+$27,000+$5,000))

=($741,000-$428,000)

=$313,000

So Retained Earnings should credited with $313,000.

35. In preparing the closing entries for the temporary accounts Retained Earnings should be debited with the amount of Dividends of $200,000.

So the Amount Retained Earnings should be debited with $200,000.

36. After closing the Accounts, the Ending Retained Earnings balance is:-

Calculations for Ending Retained Earnings:-

Ending Retained Earnings=(Retained Earnings+Net Income-Dividends)

=($325,000+$313,000-$200,000)

=($325,000+$113,000)

=$438,000

So the Amount of Ending Retained Earnings is $438,000.