Question

At the beginning of Year 2, Oak Consulting had the following normal balances in its accounts:

Account	Balance
Cash	$	25,000
Accounts receivable		21,600
Accounts payable		11,300
Common stock		21,900
Retained earnings		13,400

The following events apply to Oak Consulting for Year 2:

1. Provided $68,100 of services on account.
2. Incurred $3,300 of operating expenses on account.
3. Collected $45,800 of accounts receivable.
4. Paid $36,100 cash for salaries expense.
5. Paid $13,140 cash as a partial payment on accounts payable.
6. Paid a $8,700 cash dividend to the stockholders.

Required
a. Record these events in a general journal. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b & d. Post the beginning balances and the transactions from Parts a&d to the appropriate accounts.

d-1. Record the closing entries in the general journal. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

e. What is the amount of change in retained earnings for the year?

f. Prepare a post-closing trial balance.

Answer 1

Requirement a)

Journal entries for year 2 in the general journal

Account name	Debit($)	Credit($)
Accounts receivable	68100
Service Revenue		68100
(Journal entry for services of $68100 rendered on account. The debit will be to accounts receivable because it is on account.)
Operating expenses	3300
Accounts payable		3300
(Operating expenses of $3300 incurred on account. Operating expenses payable are assumed to shown with accounts payable, hence the credit to accounts payable account.)
Cash	45800
Accounts Receivable		45800
(accounts receivable paid to the extent of $45800)
Salaries expense	36100
Cash		36100
(Salaries expense of $36100 paid in cash)
Accounts Payable	13140
Cash		13140
(Accounts Payable paid to the extent of $13140 in cash)
Retained Earnings Account	8700
Cash		8700
(Cash dividend of $8700 paid directly out of retained earnings)

Requirement b)

Cash Account

	Debit($)		Credit($)
balance brought down	25000	Salaries expense	36100
accounts receivable	45800	Accounts Payable	13140
		Retained Earnings(dividend Paid)	8700
		Balance carried down	12860
	70800		70800

Accounts Receivable Account

Debit($) Credit($) balance brought down 21600 cash received 45800 service revenue 68100 Balance Carried down 43900 89700 89700

Account Payable Account

	Debit($)		Credit($)
Cash	13140	balance brought down	11300
Balance Carried down	1460	operating expenses	3300
	14600		14600

Common Stock Account

	Debit($)		Credit($)
balance brought down	21900	Balance carried down	21900

Retained Earnings Account

	Debit($)		Credit($)
Cash dividend	8700	balance brought down	13400
Balance Carried down	33400	income summary	28700
	42100		42100

Operating Expenses Account

Debit($) Credit($) Accounts payable 3300 income summary 3300

Income summary

Debit($) Credit($) operating expenses 3300 Service Revenue 68100 salary expense 36100 retained Earnings (Profit) 28700 68100 68100

Service Revenue Account

Debit($) Credit($) income summary 68100 accounts receivable 68100

Salaries Expense Account

Debit($) Credit($) Cash paid 36100 income summary 36100

Requirement d-1:

Closing entries

Account Name	Debit($)	Credit($)
Service revenue	68100
Income Summary		68100
(Closing entry for transfer of revenue to income summary)
Income summary	39400
Operating Expenses		3300
Salaries Expenses		36100
(Expenses transferred to the income summary)
Income summary	28700
Retained Earnings		28700
(operating profit transferred to retained earnings account)

Requirement e:

The balance of retained earnings account changed from $13400 from the beginning of year 2 to $33400 at the end of year 2, which shows an increase of retained earnings by $20000 (33400-13400). Refer to retained earnings account in requirement b for clarity.

Requirement f:

Closing Trial Balance

Account	Debit($)	Credit($)
Cash	12860
Accounts Receivable	43900
Accounts Payable		1460
Common Stock		21900
Retained Earnings		33400
Total	56760	56760

notes:

1. Refer to requrement b accounts to find the accounts having balances. Only the accounts having a closing balance will be featured in the closing trial balance