Question

The adjusted trial balance of Rachael Rey Music Company at June 30, 2018, follows:

RACHAEL REY MUSIC COMPANY

Adjusted Trial Balance

June 30, 2018

Balance

Account Title Debit Credit

Cash \(4,000

Accounts Receivable 38,400

Merchandise Inventory 18,100

Office Supplies 300

Furniture 39,900

Accumulated Depreciation-Furniture \)8,200

Accounts Payable 13,800

Salaries Payable 850

Unearned Revenue 7,500

Notes Payable, long-term 17,000

Common Stock 6,000

Retained Earnings 21,350

Dividends 40,000

Sales Revenue 184,000

Cost of Goods Sold 85,500

Selling Expense 18,600

Administrative Expense 12,000

Interest Expense 1,900

Total \(258,700 \)258,700

Requirements

1. Prepare Rachael Rey’s multi-step income statement for the year ended June 30, 2018.

2. Journalize Rachael Rey’s closing entries.

3. Prepare a post-closing trial balance as of June 30, 2018.

Short answer

The net income of the company is$66,000.

Step-by-step solution

Meaning of Trial Balance

A bookkeeping worksheet that contains the closing balances of all the ledger accounts is termed trail balance. Trial balance is prepared periodically by business entities according to their requirements, and it facilitates the drafting offinancial statements

Preparation of multi-step income statement

RACHAEL REY MUSIC COMPANY
Multi-step Income Statement
For the year ended June 30, 2018
Particulars	Amounts ($)
Sales revenue	184,000
Less: Cost of goods sold	(85,500)
Gross profit	98,500
Less: Operating expenses
Selling expenses	(18,600)
Administrative expenses	(12,000)
Income from operations	67,900
Less: Other expenses
Interest expenses	(1,900)
Net income	66,000

Preparation of closing entries

Date	Accounts and Explanation	Debit ($)	Credit ($)
2018
Jun 30	Sales revenue	184,000
	Income summary		184,000
	(To close the revenue accounts)
Jun 30	Income summary	118,000
	Cost of goods sold		85,500
	Selling expenses		18,600
	Administrative expenses		12,000
	Interest expenses		1,900
	(To close expenses accounts)
Jun 30	Income summary (184000-118000)	66,000
	Retained earnings		66,000
	(To close income summary account)
Jun 30	Retained earnings	40,000
	Dividends		40,000
	(To close the dividend account)

Preparation of post-closing trial balance

Account Title	Debit ($)	Credit ($)
Cash	4,000
Accounts receivables	38,400
Merchandise inventory	18,100
Office supplies	300
Furniture	39,900
Accumulated depreciation-Furniture		8,200
Accounts payable		13,800
Salaries payable		850
Unearned revenue		7,500
Notes payable, long-term		17,000
Common stock		6,000
Retained earnings (21350+66000-40000)		47,350
Total	$100,700	$100,700