Question

1. The adjusted account balances of Fitness Centre at July 31 are as follows: Accounts Account Balances Accounts Account Bal Cash $ 11,000 Service Revenue $105,000 Accounts Receivable 25,000 Interest Revenue 8,000 Supplies 4,000 Depreciation Expense 27,000 Prepaid Insurance 8,000 Insurance Expense 6,000 Buildings 300,000 Salary Expense 30,000 Accumulated Depreciation— Supplies Expense 9,000 Buildings 120,000 Utilities Expense 12,000 Accounts Payable 19,000 P. Jorgenson, Capital 195,000 P. Jorgenson, Drawings 15,000 Instructions Prepare the end of the period closing entries for the Fitness Centre.

2. The following are the adjusted account balances of Sally's Salon and Spa as at June 30, 2017, the business year end. The accounts are listed in alphabetical order, and all are in their normal balance. Accounts payable $ 2,340 Note receivable $ 5,000 Accounts receivable 500 Prepaid insurance 620 Accumulated depreciation - computers 2,000 Rent expense 24,000 Accumulated depreciation - shop equipment 6,320 S. Juul-Hansen, capital 11,760 Cash 3,250 S. Juul-Hansen, drawings 12,000 Computers 6,000 Service revenue 125,600 Depreciation expense 4,160 Shop equipment 15,800 Insurance expense 2,000 Supplies 1,190 Interest expense 100 Supplies expense 4,560 Note payable 14,000 Wages expense 82,840 Additional information: The note payable is due January 31, 2018. During the year, Sally Juul-Hansen invested $10,000. Instructions Prepare the income statement, statement of owner equity, and classified balance sheet for Sally's June 30, 2017 year end in good format.

Answer 1

1. Preparing Closing Entries for Fitness Centre:-

Closing Entries:- These Entries are prepared at the end of the Accounting period to close All Expenses and Revenues Accounts which are Temporary Accounts. These Temporary Accounts are closed by transferring them into Income Summary Account which is also a temporary account and also transferred to Owner's Capital which is a permanent Account and shows in Balance Sheet.

Fitness Centre

General Journal

July 31

Date	Accounts Title and Explanation	Debit	Credit
July 31	Service Revenue	$105,000
	Interest Revenue	$8,000
	Income Summary		$113,000
	(To close Revenue Accounts)
July 31	Income Summary	$84,000
	Depreciation Expense		$27,000
	Insurance Expense		$6,000
	Salary Expense		$30,000
	Supplies Expense		$9,000
	Utilities Expense		$12,000
	(To close Expenses Accounts)
July 31	Income Summary	$29,000
	Jorgensen, Capital		$29,000
	(To close Income Summary Account)
July 31	Jorgensen, Capital	$15,000
	Jorgensen, Drawings		$15,000
	(To close Drawings Account)

Working Notes:-

1. Calculations for Net Income:-

Net Income=(Total Revenue- Total Expenses)

=(Service Revenue+Interest Revenue)-(Depreciation Expense+Insurance Expense+Salary Expense+Supplies Expense+Utilities Expense)

=($105,000+$8,000)-($27,000+$6,000+$30,000+$9,000+$12,000)

=($113,000-$84,000)

=$29,000

2. Calculations for Jorgensen Capital Ending:-

Jorgensen Capital Ending=(Jorgensen Capital Beginning+Net Income)- Jorgensen Drawings

=($195,000+$29,000)-$15,000

=($224,000-$15,000)

=$209,000

2. Preparing Income Statement, Statement of Owner's Equity and Classified Balance Sheet for Sally's June 30,2017:-

Sally's Salon and Spa

Income Statement

For the Year Ended June 30,2017

Accounts	Amount	Amount
Revenue:-
Service Revenue	$125,600
Total Revenue		$125,600
Less:- Expenses
Rent Expense	$24,000
Depreciation Expense	4,160
Insurance Expense	2,000
Interest Expense	100
Supplies Expense	4,560
Wages Expense	82,840
Total Expenses		($117,660)
Net Income		$7,940

Sally's Salon and Spa

Statement of Owner's Equity

For the Year Ended June 30,2017

Accounts	Amount
Juul- Hansen, Capital	$11,760
Add:- Net Income	7,940
	$19,700
Less:- Juul-Hansen, Drawings	(12,000)
Juul-Hansen Capital Ending	$7,700
​​​​

Sally's Salon and Spa

Classified Balance Sheet

June 30,2017

Accounts	Amount	Amount
Assets:-
Current Assets:-
Cash	$3,250
Accounts Receivable	500
Notes Receivable	5,000
Supplies	1,190
Prepaid Insurance	620
Total Current Assets		$10,560
Property Plant and Equipment:-
Computers	$6,000
Less:- Accumulated Depreciation, Computers	(2,000)
Shop Equipment	15,800
Less:- Accumulated Depreciation, Shop Equipment	(6,320)
Total Property Plant and Equipment		$13,480
Total Assets		$24,040
Liabilities and Owner's Equity:-
Current Liabilities:-
Accounts Payable	$2,340
Notes Payable, due in January 2018	14,000
Total Current Liabilities		$16,340
Owner's Equity:-
Juul-Hansen Capital Ending	$7,700
Total Owner's Equity		$7,700
Total Liabilities and Owner's Equity		$24,040