Question

In: Accounting

Burbon Ltd. is a private company reporting under ASPE. The adjusted trial balance at its fiscal...

  1. Burbon Ltd. is a private company reporting under ASPE. The adjusted trial balance at its fiscal year end, December 31, 2021, is shown below:

BURBON LTD.

Adjusted Trial Balance

December 31, 2021

Debit

Credit

Cash

$ 25,000

Accounts Receivable

16,000

Inventory

333,000

Prepaid Expenses

24,000

Supplies

1,600

Equipment

37,500

Accounts Payable

$ 36,000

Income tax payable

72,000

Unearned Revenue

86,000

Common shares (56,000 issued)

56,000

Retained Earnings (January 1, 2021)

19,900

Dividends

5,600

Sales

772,000

Cost of goods sold

445,000

Depreciation expense

7500

Interest expense

1,000

Wages expense

72,000

Insurance expense

1,100

Income tax expense

57,600

Rent expense

15,000

$ 1,041,900

$ 1,041,900


Instructions

a)

Prepare a statement of retained earnings.

b)

Journalize the closing entries.

Solutions

Expert Solution

Credit Debit $ 7,72,000 $ 7,72,000 1- Statement of Retained earnings Burbon Ltd Statement of Retained earnings For the year ended December 31, 2021 Retained earnings, December 31, 2020 $ 19,900 add: Net income $ 1,72,800 less: Dividend $ (5,600) Retained earnings, December 31, 2021 $ 1,87,100 $ 5,99,200 1,000 i. Opening balance of retained earnings is the balance of Retained earnings in the Adjusted Trial Balance 2- Closing entries Date Accounts title and explanations Dec-31 Sales Income summary (revenue account closed) Dec-31 Income summary Cost of goods sold Depreciation expense Interest expense Wages expense Insurance expense Income tax expense Rent expense (all expense accounts closed) Dec-31 Income summary Retained earnings (net income transferred to retained earnings) Dec-31 Retained earnings Dividends (dividend account closed) $ 4,45,000 $ 7,500 $ $ 72,000 $ 1,100 $ 57,600 $ 15,000 ii. Net income and Dividend amount are from closing entries posted at the end of the period. [Refer closing entries] $ 1,72,800 $ 1,72,800 $ 5,600 $ 5,600 At the end of period, all expenses and revenue accounts are transfer to income summary account, any balance in income summary account (loss if debit balance and profit if credit balance) shall be transfer to Retained earnings (Profit should add and loss should deduct from Retained earnings opening balance). Dividend account should be closed by transferring to Retained earnings account.


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