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, 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	$12,940
Accounts Receivable	28,160
Supplies	4,400
Prepaid Insurance	9,500
Land	100,000
Buildings	360,000
Accumulated Depreciation-Buildings		117,200
Equipment	260,000
Accumulated Depreciation-Equipment		152,700
Accounts Payable		33,310
Salaries Payable		3,300
Unearned Rent		1,500
Common Stock		150,000
Retained Earnings		277,520
Dividends	25,000
Service Fees		474,980
Rent Revenue		5,020
Salaries Expense	340,520
Depreciation Expense-Equipment	18,500
Rent Expense	15,500
Supplies Expense	10,960
Utilities Expense	9,900
Depreciation Expense-Buildings	6,600
Repairs Expense	5,460
Insurance Expense	2,990
Miscellaneous Expense	5,100
	1,215,530	1,215,530

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 $35,000 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.
$

Answer 1

All revenue and expense accounts are transferred to Income statement.

The balance of net income or loss is transferred to retained earnings.

Dividends is transferred to retained earnings.

Balance sheet is prepared based on that all debit balances in assets and credit balances in liabilities.

Accumulated depreciation is shown in assets side as reduction from the asset values.