Question

Financial Statements and Closing Entries

The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2019, 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, 2019
	Adjusted Trial Balance
Account Title	Dr.	Cr.
Cash	17,960
Accounts Receivable	39,100
Supplies	6,110
Prepaid Insurance	13,200
Land	139,000
Buildings	500,000
Accumulated Depreciation-Buildings		162,800
Equipment	361,000
Accumulated Depreciation-Equipment		212,000
Accounts Payable		46,250
Salaries Payable		4,580
Unearned Rent		2,080
Nicole Gorman, Capital		593,820
Nicole Gorman, Drawing	34,700
Service Fees		659,570
Rent Revenue		6,970
Salaries Expense	472,850
Depreciation Expense—Equipment	25,700
Rent Expense	21,500
Supplies Expense	15,210
Utilities Expense	13,750
Depreciation Expense—Buildings	9,170
Repairs Expense	7,580
Insurance Expense	4,150
Miscellaneous Expense	7,090
	1,688,070	1,688,070

1. Prepare an income statement

Prepare a statement of owner's equity (no additional investments were made during the year).

Prepare a balance sheet.

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

3. If the balance of Nicole Gorman, Capital had instead increased $115,000 after the closing entries were posted and the withdrawals remained the same, what would have been the amount of net income or net loss?

Answer 1

1.

Statement of Owner's Capital
Beginning Balance- November 01,2018	$                  5,93,820
Net Income	$                     89,540
Subtotal	$                  6,83,360
Less:Drawings	$                    -34,700
Ending Balance- October 31, 2019	$                  6,48,660

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2.

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3.

If the balance of Nicole Gorman, Capital had instead increased $115,000 after the closing entries were posted and the withdrawals remained the same, what would have been the amount of net income or net loss?

Answer:

Net Increase in Capital= $115000

Add: Withdrawals= $34700

Net Income would be = $149700

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