Chapter 4: 4-17RQ (page 216)
If a business had a net loss for the year, what would be the closing entry to close Income Summary and transfer the net loss to the Retained Earnings account?
The following entry will be recorded:
Date | Accounts and Explanation | Debit | Credit |
Retained Earnings | XXX | ||
Income Summary | XXX |
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The unadjusted trial balance of Farish Investment Advisers at December 31, 2018, follows: Adjustment data at December 31, 2018: a. Unearned Revenue earned during the year, \(800. b. Office Supplies on hand, \)4,500. c. Depreciation for the year, \(4,500. d. Accrued Salaries Expense, \)5,000. e. Accrued Service Revenue, \(6,500. Requirements 1. Prepare a worksheet for Farish Investment Advisers at December 31, 2018. 2. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in account format. 3. Prepare closing entries. Account Title Office Supplies Cash Debit Credit Accounts Receivable Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Notes Payable (long-term) Dividends Service Revenue Insurance Expense Salaries Expense Supplies Expense Interest Expense Rent Expense Balance \) 30,000 \( 198,000 \) 198,000 5,500 $ 9,000 13,000 27,000 21,000 93,000 Retained Earnings 29,500 29,000 2,500 40,000 5,500 5,000 51,000 7,000 28,000 Depreciation Expense—Equipment Total FARISH INVESTMENT ADVISERS Unadjusted Trial Balance December 31, 2018
Selected accounts for Kebby Photography at December 31, 2018, follow: Salaries Expense 31,800 1,400 2,700 Supplies Expense 7,000 1,500 Depreciation Expense—Building Depreciation Expense—Furniture Dividends 14,000 Service Revenue 33,000 4,500 Retained Earnings 49,000 Requirements 1. Journalize Kebby Photography’s closing entries at December 31, 2018. 2. Determine Kebby Photography’s ending Retained Earnings balance at December 31, 2018.
Why are financial statements prepared in a specific order? What is that order?
How is the Income Summary account used? Is it a temporary or permanent account?
On December 1, Bob Waldo began an auto repair shop, Waldo’s Quality Automotive. The following transactions occurred during December: Dec. 1 Waldo contributed \(70,000 cash to the business in exchange for shares of common stock. 1 Purchased \)12,000 of equipment paying cash. 1 Paid \(1,750 for a five-month insurance policy starting on December 1. 9 Paid \)20,000 cash to purchase land to be used in operations. 10 Purchased office supplies on account, \(2,800. 19 Borrowed \)15,000 from the bank for business use. Waldo signed a note payable to the bank in the name of the corporation. The note is due in five years. 22 Paid \(1,300 for advertising expenses. 26 Paid \)900 on account. 28 The business received a bill for utilities to be paid in January, \(280. 31 Revenues earned during the month included \)16,000 cash and \(3,600 on account. 31 Paid employees’ salaries \)3,800 and building rent \(1,200. Record as a compound entry. 31 The business received \)1,440 for auto screening services to be performed next month. 31 Paid cash dividends of \(5,500 to stockholders. The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Equipment; Accumulated Depreciation—Equipment; Accounts Payable; Utilities Payable; Interest Payable; Unearned Revenue; Notes Payable; Common Stock; Retained Earnings; Dividends; Income Summary; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; Advertising Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation Expense—Equipment. Adjustment data: a. Office Supplies used during the month, \)1,800. b. Depreciation for the month, \(200. c. One month insurance has expired. d. Accrued Interest Expense, \)75. Requirements 1. Prepare the journal entries, and post to the T-accounts. 2. Prepare an unadjusted trial balance. 3. Complete the worksheet for the month ended December 31, 2018 (optional). 4. Prepare the adjusting entries, and post to the T-accounts. 5. Prepare an adjusted trial balance.6. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in report form. 7. Prepare the closing entries, and post to the T-accounts. 8. Prepare a post-closing trial balance.
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