Question

The adjusted trial balance for China Tea Company at December 31, 2021, is presented below:

	Debit			Credit
Cash		12,400
Accounts receivable		169,000
Prepaid rent		6,900
Inventory		44,000
Equipment		490,000
Accumulated depreciation—equipment					144,000
Accounts payable					49,000
Notes payable—due in three months					49,000
Salaries payable					5,900
Interest payable					20,400
Common stock					295,000
Retained earnings					91,800
Dividends		17,500
Sales revenue					590,000
Costs of goods sold		275,000
Salaries expense		139,000
Rent expense		34,000
Depreciation expense		49,000
Interest expense		3,900
Advertising expense		4,400
Totals		1,245,100			1,245,100

Required:
Prepare the closing entries for China Tea Company for the year ended December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Solution

Closing Entries
Date	Accounts and Explanations	Debit	Credit
Dec-31	Sales revenue	$     590,000.00
	Income Summery		$     590,000.00
	(Revenue accounts closed)
Dec-31	Income Summery	$     257,800.00
	Cost of goods sold		$       27,500.00
	Salaries expense		$     139,000.00
	Rent expense		$       34,000.00
	Depreciation expense		$       49,000.00
	Interest expense		$          3,900.00
	Advertisement expense		$          4,400.00
	(Expenses Accounts closed)
Dec-31	Income Summery	$     332,200.00
	Retained earnings		$     332,200.00
	(To close income summery)
Dec-31	Retained earnings	$       17,500.00
	Dividends		$       17,500.00
	(To close Dividends)