Question

The following selected information for sana co . for year ended 31/12/2018 in euro

Sales	520000
Beginning inventory	100000
Purchases	350000
Fright on Purchases	16000
Purchases return	35000
Salaries	44000	50% selling
Fright out	3000
Sales discount	2000
Advertising expenses	2200	50% selling
Traveling expenses	8000	50% selling
Tele	600
Rent expenses	4300	1300$ selling
Retained earning	255000
Supplies expenses	5300	Selling
Dividend	25000
Bonds	1200000
Interest expenses	1700
Depreciation expenses	6700	50% selling
Bad debit expenses	1000
Insurance expenses	360
Interest receivables	800
Interest revenues	800
Prepaid rant	500
Selling commissions	6000
Salaries payable	(5000)

Required : prepare the closing entries of the year if the tax rate 20%

Answer 1

Bayton Limited
Income Statement
For the year ended December 31, 2021
Particulars	Amount	Amount
Sales		520,000
Less: Sales discounts		2,000
Net Sales		518,000
Less: Cost of goods sold
Beginning inventory	100,000
Purchases less return	315,000
Freight on Purchases	16,000
	431,000
Less: Ending Inventory	-
		431,000
Gross Profit		87,000
Operating expenses:
Administrative expenses
Salaries (44,000 + 5,000)/2	24,500
Telephone expenses	600
Advertising expenses	1,100
Travelling expenses	4,000
Rent expenses	3,000
Depreciation	3,350
Insurance expenses	360
	36,910
Selling expenses
Salaries (44,000 + 5,000)/2	24,500
Freight outstanding	3,000
Advertising expenses	1,100
Travelling expenses	4,000
Rent expenses	1,300
Supplies expenses	5,300
Depreciation	3,350
Selling commissions	6,000
Bad-debt expenses	1,000
Total operating expenses		86,460
Income from operations		540
Non-operating income and expenses
Interest revenues	800
Interest receivables	800
Less: Interest expenses	1,700
		(100)
Income before taxes		440
Less: Income tax @ 20%		88
Net Income		352

The closing entries are:-
Bayton Limited
Journal
Date	Particulars	Debit	Credit
Dec-31	Sales		Dr	520,000
	Interest revenues	Dr	800
	Interest receivables		Dr	800
	To	Income Summary			521,600
	(Being revenue accounts adjusted to income summary)
Dec-31	Income Summary		Dr	521,248
	To	Sales Discounts			2,000
	To	Cost of goods sold			431,000
	To	Salaries			49,000
	To	Telephone expenses			600
	To	Advertising expenses			2,200
	To	Travelling expenses			8,000
	To	Rent expenses			4,300
	To	Depreciation			6,700
	To	Insurance expenses			360
	To	Freight outstanding			3,000
	To	Supplies expenses			5,300
	To	Selling commissions			6,000
	To	Bad-debt expenses			1,000
	To	Interest expenses			1,700
	To	Income Taxes			88
	(Being expenses accounts adjusted to income summary)
Dec-31	Income Summary			352
	To	Retained Earnings			352
	(Being the balance in income statement transferred)
Dec-31	Retained Earnings		25,000
	To	Dividends			25,000
	(Being dividends paid out of retained earnings)
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