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Chapter 5: Q23E (page 302)

The adjusted trial balance of Quality Office Systems at March 31, 2018, follows:

Requirements

1. Journalize the required closing entries at March 31, 2018.

2. Set up T-accounts for Income Summary; Retained Earnings; and Dividends. Post the closing entries to the T-accounts, and calculate their ending balances.

3. How much was Quality Office鈥檚 net income or net loss?

Short Answer

Expert verified

The net income of the Quality Office was$83,750.

Step by step solution

01

Meaning of Trial Balance

In accounting, trial balance refers to a tabular formatted report that contains the balances of all the ledger accounts of both aspects, i.e., debit and credit. A trial balance facilitates the business entities to draft their annualfinancial statements.

02

Preparation of closing entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Mar 31

Sales revenue

235,700

Income summary

235,700

(To close the revenue account)

Mar 31

Income summary

151,950

Cost of goods sold

107,550

Selling expense

27,400

Administrative expense

14,200

Interest expense

2,800

(To close the expense accounts)

Mar 31

Income summary (235700-151950)

83,750

Retained earnings

83,750

(To close the income summary account)

Mar 31

Retained earnings

41,500

Dividends

41,500

(To adjust the dividends)

03

Preparation of T-accounts

Income Summary

Date

Particulars

Amount ($)

Date

Particulars

Amount ($)

2018

2018

Mar 31

Expenses

151,950

Mar 31

Sales revenue

235,700

Retained earnings

83,750

Mar 31

Ending balance

0

Retained Earnings

Date

Particulars

Amount ($)

Date

Particulars

Amount ($)

2018

2018

Mar 31

Dividends

41,500

Mar 31

Opening balance

4,950

Mar 31

Income summary

83,750

Mar 31

Ending balance

47,200

Dividends

Date

Particulars

Amount ($)

Date

Particulars

Amount ($)

2018

2018

Mar 31

Opening balance

41,500

Mar 31

Retained earnings

41,500

Mar 31

Ending balance

0

04

Computation of net income or net loss

Net Income=Revenues-Expenses=$235,700-$151,950=$83,750

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Most popular questions from this chapter

Question: Journalize the following transactions that occurred in January 2018 for Mike鈥檚 Amusements. Assume Mike鈥檚 uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, \(5,000. Terms 1/10, n/EOM, FOB shipping point.

6 Paid freight bill of \)150 on January 4 purchase.

8 Returned half the inventory purchased on January 4 from Vanderbilt Company.

10 Sold merchandise inventory for cash, \(1,100. Cost of goods, \)440. FOB destination.

11 Sold merchandise inventory to Gilmore Corporation, \(10,100, on account, terms of 3/10, n/EOM. Cost of goods, \)5,555. FOB shipping point.

12 Paid freight bill of \(30 on January 10 sale.

13 Sold merchandise inventory to Cadet Company, \)8,800, on account, terms of 3/10, n/45. Cost of goods, \(4,400. FOB shipping point.

14 Paid the amount owed on account from January 4, less return and discount.

18 Purchased inventory of \)4,600 on account from Roberts Corporation. Payment terms were 1/10, n/30, FOB destination.

20 Received cash from Gilmore Corporation, less discount.

26 Paid amount owed on account from January 18, less discount.

28 Received cash from Cadet Company.

29 Purchased inventory from Silk Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)240.

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鈥檚 multi-step income statement for the year ended June 30, 2018.

2. Journalize Rachael Rey鈥檚 closing entries.

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

Macarthy Landscape Supply鈥檚 selected accounts as of December 31, 2018, follow. Compute the gross profit percentage for 2018.

Selling Expenses $ 12,900

Interest Revenue 900

Net Sales Revenue 134,700

Cost of Goods Sold 114,000

Administrative Expenses 10,200

Journalize the following sales transactions for Paul Sportswear. Explanations are not required.

Aug. 1 Paul sold \(66,000 of women鈥檚 sportswear on account, credit terms are 2/10, n/30. Cost of goods is \)33,000. Paul uses the gross method to record sales revenue.

25 Paul receives payment from the customer on the amount due.

Describe the multi-step income statement.
See all solutions

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