Question

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

	Debit			Credit
Cash		12,500
Accounts receivable		170,000
Prepaid rent		7,000
Inventory		45,000
Equipment		500,000
Accumulated depreciation—equipment					145,000
Accounts payable					50,000
Notes payable—due in three months					50,000
Salaries payable					6,000
Interest payable					21,000
Common stock					300,000
Retained earnings					94,000
Dividends		18,000
Sales revenue					600,000
Costs of goods sold		280,000
Salaries expense		140,000
Rent expense		35,000
Depreciation expense		50,000
Interest expense		4,000
Advertising expense		4,500
Totals		1,266,000			1,266,000

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	$     600,000.00
	Income Summery		$     600,000.00
	(Revenue accounts closed)
Dec-31	Income Summery	$     513,500.00
	Cost of goods sold		$     280,000.00
	Salaries expense		$     140,000.00
	Rent expense		$       35,000.00
	Depreciation expense		$       50,000.00
	Interest expense		$          4,000.00
	Advertisement expense		$          4,500.00
	(Expenses Accounts closed)
Dec-31	Income Summery	$       86,500.00
	Retained earnings		$       86,500.00
	(To close income summery)
Dec-31	Retained earnings	$       18,000.00
	Dividends		$       18,000.00
	(To close Dividends)