Question

1. Financial Statements and Closing Entries

   The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 20Y9, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:

   The Gorman Group End-of-Period Spreadsheet For the Year Ended October 31, 20Y9
   	Adjusted Trial Balance
   Account Title	Dr.	Cr.
   Cash	$12,380
   Accounts Receivable	26,940
   Supplies	4,210
   Prepaid Insurance	9,090
   Land	96,000
   Buildings	344,000
   Accumulated Depreciation-Buildings		112,200
   Equipment	249,000
   Accumulated Depreciation-Equipment		146,100
   Accounts Payable		31,870
   Salaries Payable		3,160
   Unearned Rent		1,430
   Common Stock		143,000
   Retained Earnings		266,030
   Dividends	23,900
   Service Fees		454,470
   Rent Revenue		4,800
   Salaries Expense	325,810
   Depreciation Expense-Equipment	17,700
   Rent Expense	14,800
   Supplies Expense	10,480
   Utilities Expense	9,470
   Depreciation Expense-Buildings	6,320
   Repairs Expense	5,220
   Insurance Expense	2,860
   Miscellaneous Expense	4,880
   	1,163,060	1,163,060

   Required:

   1. Prepare an income statement.

   The Gorman Group Income Statement For the Year Ended October 31, 20Y9
   Revenues:
   	$
   Total revenues		$
   Expenses:
   	$
   Total expenses
   		$

   Prepare a statement of stockholders’ equity. During the year, no additional Common stock was issued. If an amount box does not require an entry, leave it blank. If a Net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign.

   The Gorman Group Statement of Stockholders’ Equity For the Year Ended October 31, 20Y9
   	Common stock	Retained earnings	Total
   	$	$	$
   	$	$	$

   Prepare a balance sheet.

   The Gorman Group Balance Sheet October 31, 20Y9
   Assets				Liabilities
   Current assets:				Current liabilities:
   		$			$
   				Total liabilities		$
   Total current assets			$
   Property, plant, and equipment:				Stockholders' Equity
   		$			$
   	$
   	$
   Total property, plant, and equipment				Total stockholders' equity
   Total assets			$	Total liabilities and stockholders' equity		$

   2. Journalize the entries that were required to close the accounts at October 31. If an amount box does not require an entry, leave it blank.

   Date	Account	Debit	Credit
   20Y9 Oct. 31
   20Y9 Oct. 31

   3. If the balance of Retained earnings had instead increased $33,500 after the closing entries were posted, and the dividends remained the same, what would have been the amount of Net income or Net loss? Enter all amounts as positive numbers.
   $  

Check My Work2 more Check My Work uses remaining.

Answer 1

Requirement 1:

Income Statement:

Gorman Group
Income Statement
For the Year Ended October 31,20Y9
Revenues:
Service Fees		454,470
Rent Revenue		4,800
Total revenues		459,270
Expenses:
Salaries Expense	325,810
Depreciation Expense—Equipment	17,700
Rent Expense	14,800
Supplies Expense	10,480
Utilities Expense	9,470
Depreciation Expense—Buildings	6,320
Repairs Expense	5,220
Insurance Expense	2,860
Miscellaneous Expense	4,880
Total expenses		397,540
Net income		61,730

Statement of changes in Retained earnings:

The Gorman Group
Retained earnings statement
For the Year Ended October 31, 20Y9
Retained earnings, November 1,20Y8		$266,030
Net income for the year	$61,730
Dividends	($23,900)
Change in retained earnings		$37,830
Retained earnings, October 31,20Y9		$303,860

Balance Sheet:

Gorman Group
Balance Sheet
October 31,20Y9
Assets		Liabilities
Cash	$12,380	Accounts Payable	$31,870
Accounts Receivable	$26,940	Salaries Payable	$3,160
Supplies	$4,210	Unearned Rent	$1,430
Prepaid Insurance	$9,090	Total liabilities	$36,460
Land	$96,000
Buildings	$344,000	Stockholders' Equity:
Accumulated Depreciation-Buildings	($112,200)	Common stock	$143,000
Equipment	$249,000	Retained earnings	$303,860
Accumulated Depreciation-Equipment	($146,100)	Total stockholders' equity	$446,860
Total assets	$483,320	Total liabilities and owner's equity	$483,320

Requirement 2:

Closing entries:

Date	Account title and Explanation	Debit	Credit
Oct 31, 20Y9	Service Fees	454,470
	Rent Revenue	4,800
	Salaries Expense		325,810
	Depreciation Expense—Equipment		17,700
	Rent Expense		14,800
	Supplies Expense		10,480
	Utilities Expense		9,470
	Depreciation Expense—Buildings		6,320
	Repairs Expense		5,220
	Insurance Expense		2,860
	Miscellaneous Expense		4,880
	Nicole Gorman, Capital		61,730
	[To close revenues and expenses accounts]
Oct 31, 20Y9	Retained earnings	23,900
	Dividends		23,900
	[To close dividends account]

Requirement 3:

Increase in retained earnings	$33,500
(Less): Dividends	($23,900)
Net income	$9,600