In: Accounting
Using the information below, prepare Closing Entries and Post-Close Trial Balance:
1. On January 1, 2020, Dreamland purchased land for $10,000 and a building for $90,000. The land was paid for with cash. The building was paid for with $5,000 cash and the remainder was financed with a 10-year notes payable.
2. Paid the accounts payable balance from 2019.
3. Purchase $500 of supplies on account.
4. Purchased 100 alarm systems (inventory) on account at a cost of $200 each.
5. Paid $6,000 of advertising expense during the year.
6. Sold 95 alarm systems for $400 each. All sales were on account. (Note - Be sure to compute cost of goods sold using the FIFO cost flow method.)
7. Paid $7,500 of utilities expense for the year.
8. Billed $65,000 of monitoring services on account for the year.
9. Replenished the petty cash fund on June 30. The fund had $25 cash remaining and receipts of $90 for yard mowing and $35 for postage.
10. After numerous attempts to collect from customers, the company wrote off $650 of uncollectible accounts receivable.
11. Collected $83,000 of accounts receivable during the year.
12. On July 1, 2020, issued $25,000 of 5 percent, five year bonds. The bonds were issued at 98.
13. On October 1, 2020, paid the note and interest owed to Trust Bank (See Beg. Balance in Notes Payable). (Note - Record Interest Expense for January-September)
14. Paid employees a total of $20,000 for salaries for the year. Federal income taxes withheld amounted to $2,200. The net amount of salaries was paid in cash. (Note - $20,000 is the gross salary amount and the actual amount paid in cash will be less due to the federal income taxes withheld. Ignore employer taxes.)
15. Paid the Federal Income Taxes withheld from salaries.
16. Paid the annual installment on the note used to finance the purchase of the building. The note had an interest rate of 5 percent and annual payments of $11,008.
17. Paid a dividend of $10,000 to the shareholders.
Adjustments:
18. There was $275 of supplies on hand at the end of the year.
19. Recognized the expired rent for the office building for the year.
20. Recognized the uncollectible accounts expense for the year using the allowance method. Dreamland estimates that 2 percent of sales on account will not be collected.
21. Recognized depreciation expense on the equipment. The equipment has a six-year life and a $2,500 salvage value. The company uses straight-line depreciation for the equipment. The equipment was purchased in 2018 and a full year of depreciation was taken in 2018 and in 2019. (Only record 2020 depreciation.)
22. Recognized depreciation expense on the service truck. The service truck has a five-year life and an $8,000 salvage value. The company uses double-declining-balance for the service truck. The truck was purchased in 2018 and a full year of depreciation was taken in 2018 and in 2019. (Only record 2020 depreciation.)
23. Recognized depreciation expense on the building. The building has a 40-year life and a $50,000 salvage value. The company uses straight-line depreciation for the building.
Dreamland Security Services Inc |
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Journal Entries for the year ending December 31, 2020 |
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Transaction |
Account Title |
Debit |
Credit |
1 |
Land |
10,000 |
|
Building |
90,000 |
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Cash |
15,000 |
||
Notes Payable |
85,000 |
||
2 |
Accounts Payable |
12,500 |
|
Cash |
12,500 |
||
3 |
Supplies |
500 |
|
Accounts Payable |
500 |
||
4 |
Inventory |
20,000 |
|
Accounts Payable |
20,000 |
||
5 |
Advertising Expense |
6,000 |
|
Cash |
6,000 |
||
6 |
Accounts Receivable |
38,000 |
|
Sales |
38,000 |
||
Cost of Goods Sold |
18,460 |
||
Inventory |
18,460 |
||
7 |
Utilities Expense |
7,500 |
|
Cash |
7,500 |
||
8 |
Accounts Receivable |
65,000 |
|
Service Revenue |
65,000 |
||
9 |
Mics Expense |
125 |
|
Cash |
125 |
||
10 |
Allowance for Doubtful Accounts |
650 |
|
Accounts Receivable |
650 |
||
11 |
Cash |
83,000 |
|
Accounts Receivable |
83,000 |
||
12 |
Cash |
24,500 |
|
Discount on Bond Issue |
500 |
||
Bonds Payable |
25,000 |
||
13 |
Notes Payable |
15,000 |
|
Interest Expense |
900 |
||
Cash |
15,900 |
||
14 |
Salary Expense |
20,000 |
|
Federal Income Tax Payable |
2,200 |
||
Cash |
17,800 |
||
15 |
Federal Income Tax Payable |
2,200 |
|
Cash |
2,200 |
||
16 |
Notes Payable |
6,758 |
|
Interest Expense |
4,250 |
||
Cash |
11,008 |
||
17 |
Dividend |
10,000 |
|
Cash |
10,000 |
||
18 |
Supplies Expense |
575 |
|
Supplies |
575 |
||
19 |
Rent Expense |
5,400 |
|
Prepaid Rent |
5,400 |
||
20 |
Bad Debt Expense |
760 |
|
Allowance for Doubtful Accounts |
760 |
||
21 |
Depreciation Expense |
1,250 |
|
Accumulated Depreciation |
1,250 |
||
22 |
Depreciation Expense |
5,184 |
|
Accumulated Depreciation |
5,184 |
||
23 |
Depreciation Expense |
1,000 |
|
Accumulated Depreciation |
1,000 |
Service Truck |
|
Cost |
36,000 |
Life |
5 Years |
Rate of Depreciation |
40% |
2018 Depreciation |
14,400 |
Book Value for 2019 |
21,600 |
2019 Depreciation |
8,640 |
Book Value for 2020 |
12,960 |
2020 Depreciation |
5,184 |
Dreamland Securities Services, Inc. Trial Balance |
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Account |
Debit |
Credit |
Cash |
84,392 |
|
Petty Cash |
150 |
|
Accounts Receivable |
37,850 |
|
Allowance for Doubtful Accounts |
3,085 |
|
Supplies |
275 |
|
Prepaid Rent |
5,400 |
|
Inventory |
6,400 |
|
Land |
10,000 |
|
Equipment |
10,000 |
|
Service Truck |
36,000 |
|
Building |
90,000 |
|
Accumulated Depreciation |
32,750 |
|
Accounts Payable |
20,500 |
|
Notes Payable |
78,242 |
|
Bonds Payable |
25,000 |
|
Discount on Bonds Payable |
500 |
|
Common Stock |
50,000 |
|
Retained Earnings |
50,645 |
|
Monitoring Revenue |
65,000 |
|
Alarm Sales |
38,000 |
|
Cost of Goods Sold |
18,460 |
|
Postage Expense |
35 |
|
Yard Care Expense |
90 |
|
Supplies Expense |
575 |
|
Uncollectible Accounts Expense |
2,060 |
|
Interest Expense |
4,925 |
|
Rent Expense |
5,400 |
|
Advertising Expense |
6,000 |
|
Depreciation Expense |
7,210 |
|
Utilities Expense |
7,500 |
|
Salaries Expense |
20,000 |
|
Dividends |
10,000 |
|
Totals |
363,222 |
363,222 |
Cash |
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Debit |
Credit |
|
Beginning Balance |
74,925 |
|
Transaction #1 |
15,000 |
|
Transaction #2 |
12,500 |
|
Transaction #5 |
6,000 |
|
Transaction #7 |
7,500 |
|
Transaction #9 |
125 |
|
Transaction #11 |
83,000 |
|
Transaction #12 |
24,500 |
|
Transaction #13 |
15,900 |
|
Transaction #14 |
17,800 |
|
Transaction #15 |
2,200 |
|
Transaction #16 |
11,008 |
|
Transaction #17 |
10,000 |
|
Total |
84,392 |
General Journal |
Debit (in $) |
Credit (in $) |
Monitoring Revenue |
65000 |
|
Alarm Sales |
38000 |
|
Income Summary |
103000 |
|
(Revenue accounts closed) |
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Income Summary |
72255 |
|
Cost of Goods Sold |
18460 |
|
Postage Expense |
35 |
|
Yard Care Expense |
90 |
|
Supplies Expense |
575 |
|
Uncollectible Accounts Expense |
2060 |
|
Interest Expense |
4925 |
|
Rent Expense |
5400 |
|
Advertising Expense |
6000 |
|
Depreciation Expense |
7210 |
|
Utilities Expense |
7500 |
|
Salaries Expense |
20000 |
|
(Expenses account closed) |
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Income Summary |
30745 |
|
Retained Earnings |
30745 |
|
(Net Income transferred) |
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Retained Earnings |
10000 |
|
Dividends |
10000 |
|
(Dividends account closed) |
Dreamland Securities Services, Inc. |
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Before closing entries balances |
Effect of Closing Entries |
Post Closing Trail balance |
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Account |
Debit |
Credit |
Debit |
Credit |
Debit |
Credit |
Cash |
84392 |
84392 |
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Petty Cash |
150 |
150 |
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Accounts Receivable |
37850 |
37850 |
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Allowance for Doubtful Accounts |
3085 |
3085 |
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Supplies |
275 |
275 |
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Prepaid Rent |
5400 |
5400 |
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Inventory |
6400 |
6400 |
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Land |
10000 |
10000 |
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Equipment |
10000 |
10000 |
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Service Truck |
36000 |
36000 |
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Building |
90000 |
90000 |
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Accumulated Depreciation |
32750 |
32750 |
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Accounts Payable |
20500 |
20500 |
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Notes Payable |
78242 |
78242 |
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Bonds Payable |
25000 |
25000 |
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Discount on Bonds Payable |
500 |
500 |
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Common Stock |
50000 |
50000 |
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Retained Earnings |
50645 |
10000 |
30745 |
71390 |
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Monitoring Revenue |
65000 |
65000 |
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Alarm Sales |
38000 |
38000 |
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Cost of Goods Sold |
18460 |
18460 |
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Postage Expense |
35 |
35 |
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Yard Care Expense |
90 |
90 |
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Supplies Expense |
575 |
575 |
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Uncollectible Accounts Expense |
2060 |
2060 |
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Interest Expense |
4925 |
4925 |
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Rent Expense |
5400 |
5400 |
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Advertising Expense |
6000 |
6000 |
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Depreciation Expense |
7210 |
7210 |
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Utilities Expense |
7500 |
7500 |
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Salaries Expense |
20000 |
20000 |
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Dividends |
10000 |
10000 |
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Totals |
363222 |
363222 |
113000 |
113000 |
280967 |
280967 |