Question

In: Accounting

Using the information below, prepare Closing Entries and Post-Close Trial Balance: 1. On January 1, 2020,...

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

Journal Entries for the year ending December 31, 2020

Transaction

Account Title

Debit

Credit

1

Land

10,000

Building

90,000

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

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

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

Solutions

Expert Solution

  • All working forms part of the answer
  • Amounts are in $
  • Only Closing entries and Post Closing Trail Balance, as asked, is provided below.
  • Closing Entries

General Journal

Debit (in $)

Credit (in $)

Monitoring Revenue

65000

Alarm Sales

38000

Income Summary

103000

(Revenue accounts closed)

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)

Income Summary

30745

Retained Earnings

30745

(Net Income transferred)

Retained Earnings

10000

Dividends

10000

(Dividends account closed)

  • Post Closing Trail Balance, along with Workings

Dreamland Securities Services, Inc.

Before closing entries balances

Effect of Closing Entries

Post Closing Trail balance

Account

Debit

Credit

Debit

Credit

Debit

Credit

Cash

84392

84392

Petty Cash

150

150

Accounts Receivable

37850

37850

Allowance for Doubtful Accounts

3085

3085

Supplies

275

275

Prepaid Rent

5400

5400

Inventory

6400

6400

Land

10000

10000

Equipment

10000

10000

Service Truck

36000

36000

Building

90000

90000

Accumulated Depreciation

32750

32750

Accounts Payable

20500

20500

Notes Payable

78242

78242

Bonds Payable

25000

25000

Discount on Bonds Payable

500

500

Common Stock

50000

50000

Retained Earnings

50645

10000

30745

71390

Monitoring Revenue

65000

65000

Alarm Sales

38000

38000

Cost of Goods Sold

18460

18460

Postage Expense

35

35

Yard Care Expense

90

90

Supplies Expense

575

575

Uncollectible Accounts Expense

2060

2060

Interest Expense

4925

4925

Rent Expense

5400

5400

Advertising Expense

6000

6000

Depreciation Expense

7210

7210

Utilities Expense

7500

7500

Salaries Expense

20000

20000

Dividends

10000

10000

Totals

363222

363222

113000

113000

280967

280967


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