Question

An adjusted trial balance for a sole proprietorship is given below. There were no new capital contributions during the year.

	Debit	Credit
Cash	$14,000
Accounts Receivable	2,000
Prepaid Rent	700
Merchandise Inventory	27,000
Accounts Payable		$4,000
Salaries Payable		500
Notes Payable		700
​Lorenzo, Capital		10,000
​Lorenzo, Withdrawals	2,500
Sales Revenue		91,600
Cost of Goods Sold	20,000
Salaries Expense	20,000
Rent Expense	12,000
Selling Expense	8,100
Supplies Expense	500
Total	$106,800	$106,800

What will be the final balance in the​ company's Lorenzo, Capital account after recording the closing

​entries?

Answer 1

Answer: The closing balance of Lorenzo capital = $10000+$31000-$2500= $ 38,500

Working:

Date	Account title and explanation	Debit	Credit
Dec.31	Sales revenue	$           91,600
	Income Summary		$              91,600
	(To close revenue account )
Dec.31	Income Summary	$           60,600
	Cost of goods sold		$              20,000
	Salaries expense		$              20,000
	Rent Expense		$              12,000
	Selling expense		$                8,100
	Supplies expense		$                   500
	(To close Expense account )
Dec.31	Income Summary ( 91600-60600)	$           31,000
	Lorenzo, Capital		$              31,000
	(To close income summary )
Dec.31	Lorenzo, Capital	$              2,500
	Lorenzo, Drawings		$                2,500
	(To close drawings account)

Lorenzo capital account:

Lorenzo, capital
Dec.31	$      2,500	Beg.bal	$       10,000
		Dec.31	$       31,000
		End.bal	$       38,500