In: Accounting
The general ledger of the Karlin Company, a consulting company, at January 1, 2021, contained the following account balances:
Account Title | Debits | Credits | ||
Cash | 28,700 | |||
Accounts receivable | 18,000 | |||
Equipment | 31,000 | |||
Accumulated depreciation | 9,300 | |||
Salaries payable | 10,000 | |||
Common stock | 49,000 | |||
Retained earnings | 9,400 | |||
Total | 77,700 | 77,700 | ||
The following is a summary of the transactions for the year:
Required:
Post the transactions, adjusting and closing entries into the
appropriate t-accounts.
Journal entries:
Service revenue, $134,000, of which $40,200 was on account and the
balance was received in cash.
Debit - Cash... $93,800
Debit - Accounts receivable.. $40,200
Credit - Service revenue......... $134,000
Collected on accounts receivable, $26,800.
Debit - Cash..... $26,800
Credit - Accounts receivable..... $26,800
Issued shares of common stock in exchange for $16,000 in cash.
Debit - Cash.... $16,000
Credit - Common stock....... $16,000
Paid salaries, $49,000 (of which $10,000 was for salaries payable at the end of the prior year).
Debit - Salaries expense.... $39,000
Debit - Salaries payable.... $10,000
Credit - Cash............ $49,000
Paid miscellaneous expense for various items, $26,400.
Debit - Miscellaneous expense.... $26,400
Credit - Cash.............. $26,400
Purchased equipment for $18,500 in cash.
Debit - Equipment.... $18,500
Credit - Cash.................. $18,500
Paid $3,250 in cash dividends to shareholders.
Debit - Dividends...... $3,250
Credit - Cash........................ $3,250
Adjusting entries:
Accrued salaries at year-end amounted to $980.
Debit - Salaries expense.... $980
Credit - Salaries payable............. $980
Depreciation for the year on the equipment is $3,100.
Debit - Depreciation expense.... $3,100
Credit - Accumulated depreciation............. $3,100
Closing entries:
To close revenue account:
Debit - Service revenue....... $134,000
Credit - Income Summary........ $134,000
To close expenses account:
Debit - Income Summary...... $69,480
Credit - Salaries expense($39,000+$980).......... $39,980
Credit - Miscellaneous expense......... $26,400
Credit - Depreciation expense............. $3,100
To close income summary (Net income/loss) :
Debit - Income Summary...... $64,520
Credit - Retained earnings........... $64,520
(Net income = Revenues - Expenses = $134,000 - $69,480 = $64,520)
To close dividends:
Debit - Retained earnings.... $3,250
Credit - Dividends.............. $3,250
posting to t-accounts: