In: Accounting
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. |
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.