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Chapter 4: Q3TI-1 (page 199)

Benson Auto Repair had the following account balances after adjustments. Assume all accounts had normal balances.

Cash \( 4,000 Common Stock \) 20,000

Accounts Receivable 3,200 Retained Earnings, January 1 15,700

Prepaid Rent 1,900 Dividends 2,100

Office Supplies 3,000 Service Revenue 1,600

Equipment 34,800 Depreciation Expense鈥擡quipment 300

Accumulated Depreciation鈥擡quipment 1,600 Salaries Expense 800

Accounts Payable 5,400 Rent Expense 500

Notes Payable (long-term) 7,000 Utilities Expense 600

Supplies Expense 100

14. Prepare the closing entries for Benson at December 31.

15. What is the balance of Retained Earnings after closing entries have been recorded? (Use a T-account to determine the balance.)

Short Answer

Expert verified

Closing entries are as follows:

Date

Accounts and Explanation

Debit

Credit

Dec. 31

Service Revenue

$1600

Income Summary

$1,600

To close revenue.

Dec. 31

Income Summary

$2,300

Rent Expense

$500

Salaries Expense

$800

Supplies Expense

$100

Utilities Expense

$600

Depreciation Expense鈥擡quipment

$300

To close expenses.

Dec. 31

Retained Earnings

$700

Income Summary

$700

To close Income Summary.

Dec. 31

Retained Earnings

$2,100

Dividends

$2,100

To close Dividends.

Step by step solution

01

Explanation on Retained Earnings

Retained earnings are the sum total of previous profits of the previous years, which are used to pay the dividends.

02

Calculation of Net Loss

NetLoss=Revenues-Expenses=$1,600-$2,300=$700

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Most popular questions from this chapter

Answer the following questions: Requirements 1. What type of normal balance does the Retained Earnings account have鈥攄ebit or credit? 2. Which type of income statement account has the same type of balance as the Retained Earnings account? 3. Which type of income statement account has the opposite type of balance as the Retained Earnings account? 4. What do we call the difference between total debits and total credits on the income statement section of the worksheet?

Mountain View Services had the following unadjusted balances at December 31, 2018:

Salaries Payable, \(0; and Salaries Expense, \)1,900. The following transactions havetaken place at the end of 2018 and beginning of 2019:

2018

Dec. 31 Accrued Salaries Expense at December 31, \(8,000.

31 Closed the Salaries Expense account.

2019

Jan. 1 Reversed the accrued salaries. (Requirement 3 only)

4 Paid salaries of \)8,500. This payment included the Salaries Payable amount,

plus $500 for the first few days of January.

Requirements

1. Open T-accounts for Salaries Payable and Salaries Expense using their unadjustedbalances at December 31, 2018.

2. Journalize the entries assuming Mountain View Services does not use reversing entries. Do not record the reversing entry on Jan. 1. Post to the accounts.

3. Open new T-accounts for Salaries Payable and Salaries Expense using their unadjusted balances at December 31, 2018. Journalize the entries assuming Mountain

View Services uses reversing entries. Don鈥檛 forget to record the reversing entry on Jan. 1. Post to the accounts. Compare the balances on January 4, 2019 with Requirement 2 balances on January 4, 2019.

This problem continues the Canyon Canoe Company situation from Chapter 3.

Requirements

1. Complete the worksheet at December 31, 2018 (optional). Use the unadjusted trial balance from Chapter 2 and the adjusting entries from Chapter 3.

2. Prepare an income statement for the two months ended December 31, 2018. Use the worksheet prepared in Requirement 1 or the adjusted trial balance from Chapter 3.

3. Prepare a statement of retained earnings for the two months ended December 31, 2018.

4. Prepare a classified balance sheet (report form) at December 31, 2018. Assume the note payable is long-term.

5. Journalize and post the closing entries at December 31, 2018. Open T-accounts for Income Summary and Retained earnings. Determine the ending balance for each account. Denote each closing amount as Clos.and each account balance as Balance.

6. Prepare a post-closing trial balance at December 31, 2018.

Dalton Hair Stylists鈥檚 adjusted trial balance follows. Prepare Dalton鈥檚 income statement for the year ended December 31, 2018. DALTON HAIR STYLISTS Adjusted Trial Balance December 31, 2018 Account Title Office Supplies Cash Debit Credit Accounts Receivable Equipment Accumulated Depreciation鈥擡quipment Accounts Payable Interest Payable Notes Payable Common Stock Dividends Service Revenue Rent Expense Supplies Expense Depreciation Expense鈥擡quipment Interest Expense Balance \( 1,300 \) 36,150 \( 36,150 400 \) 2,200 3,100 500 1,400 16,150 13,800 3,900 850 2,200 2,300 1,500 1,800 20,900 Total.

On December 1, Bob Waldo began an auto repair shop, Waldo鈥檚 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 \(3,600 on account. 31 Paid employees鈥� salaries \)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 \(5,500 to stockholders. The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Equipment; Accumulated Depreciation鈥擡quipment; Accounts Payable; Utilities Payable; Interest Payable; Unearned Revenue; Notes Payable; Common Stock; Retained Earnings; Dividends; Income Summary; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; Advertising Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation Expense鈥擡quipment. Adjustment data: a. Office Supplies used during the month, \)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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