Question

The following trial balance was taken from the books of Fisk Corporation on December 31, 2014.

            Account                                                                                         Debit                 Credit     

Cash                                                                                                        $ 9,000

Accounts Receivable                                                                                 40,000

Notes Receivable                                                                                      10,000

Interest Revenue                                                                                                                       500

Allowance for Doubtful Accounts                                                                                      $   1,800

Inventory                                                                                                    44,000

Insurance expense                                                                                      2,000

Prepaid Insurance                                                                                       4,800

Equipment                                                                                               110,000

Accumulated Depreciation--Equip.                                                                                      17,000

Accounts Payable                                                                                                                 10,800

Common Stock                                                                                                                     44,000

Retained Earnings                                                                                                                55,000

Sales Revenue                                                                                                                   280,000

Cost of Goods Sold                                                                                 126,000

Salaries and Wages Expense                                                                   50,500

Rent Expense                                                                                            12,800                             

                                                                                                Totals    $409,100             $409,100

Prepare Closing Entries:

Answer 1

• Closing entries

Date	Accounts title	Debit	Credit
31-Dec	Sales revenue	$280,000
	Interest Revenue	$500
	Income Summary		$280,500
	(to close revenues)
31-Dec	Income Summary	$191,500
	Cost of Goods Sold		$126,000
	Salaries & Wages expense		$50,500
	Rent Expense		$12,800
	Insurance expense		$2,200
	(to close expenses)
31-Dec	Income Summary	$89,000
	Retained earnings		$89,000
	(to close Income Summary - Net Income)

General Concepts regarding Closing entries:

#1:Temporary accounts, like Revenue accounts, have normal CREDIT balances, and hence they are closed by DEBITING the account.

#2:Temporary accounts, like Expense accounts or Contra revenue accounts, have normal DEBIT balances, and hence they are closed by CREDITING the account.

#3: In case of Net Income, Income Summary account has a CREDIT balance, and in order to close the Income Summary account, we DEBIT the account, and Credit Retained earnings/Owner's Capital

#4: In case of Net Loss, Income Summary account has a DEBIT balance, and in order to close the Income Summary account, we CREDIT the account, and Debit Retained earnings/Owner's Capital

#5: Dividend accounts have normal DEBIT balance, and are closed by CREDITING them, and debiting Retained earnings account.

#6: Drawings or Withdrawal account have a normal DEBIT balance, and hence closed by CREDITING the account, and debiting Owner's Capital account.