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Chapter 3: Q14E (page 134)

(LO5) (Closing Entries) Presented below is information related to Gonzales Corporation for the month of January 2017.

Cost of Goods sold \( 208,000 Salaries and wages expenses \)61,000

Delivery expenses \( 7,000 Sales discounts \) 8,000

Insurance expenses \( 12,000 Sales returns and allowances \)13,000

Rent expenses \( 20,000 Sales revenue \)350,000

Instructions:

Prepare the necessary closing entries.

Short Answer

Expert verified

The total amount of income summary expenses is $329,000.

Step by step solution

01

Meaning of Journal entry

The journal entry is the act of keeping a record of any transactions and events either economic or non-economic. The recording of journal entry, includes Serial number or transaction number, Date, Accounts titles and explanations, debit and credit, and narrations.

02

Journal Entries

The necessary closing entries for the above information are as follows:


Closing Entries

No.

Date

Accounts Titles and Explanations

Debit

Credit

1

Jan 31

Sales Revenue

$ 350,000

Income Summary

$ 350,000

2

Jan 31

Income Summary

$ 329,000

Cost of goods sold

$ 208,000

Delivery Expenses

$ 7,000

Insurance Expenses

$ 12,000

Rent Expenses

$ 20,000

Salaries and wages expenses

$ 61,000

Sales discounts

$ 8,000

Sales returns and allowances

$ 13,000

3

Jan 31

Income Summary

$ 21,000

Retained Earnings

$ 21,000

Working notes:

1) Sales Revenue = $350,000 (Given)

2) Income Summary = ($208,000+$7,000+$12,000+$20,000+$61,000+$8,000+$13,000)

= $329,000

3) Retained earnings = ($350,000 - $329,000) = $21,000

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Most popular questions from this chapter

Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September.

Sep. 1

Kawabata begins practice as a dentist and invests \(20,000 cash

2

Purchases dental equipment on account from Green Jacket Co. for \)17,280

4

Pays rent for office space, \(680 for the month.

4

Employs a receptionist, Michael Bradley

5

Purchases dental supplies for cash, \)942

8

Receives cash of \(1,690 from patients for services performed

10

Pays miscellaneous office expenses, \)430.

14

Bills patients \(5,820 for services performed.

18

Pays Green Jacket Co. on account, \)3,600.

19

Withdraws \(3,000 cash from the business for personal use.

20

Receives \)980 from patients on account

25

Bills patients \(2,110 for services performed

30

Pays the following expenses in cash: salaries and wages \)1,800; miscellaneous office expenses \(85.

30

Dental supplies used during September, \)330.

Instructions

  1. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies, Equipment, Accumulated Depreciation鈥擡quipment, Accounts Payable, Owner鈥檚 Capital, Service Revenue, Rent Expense, Office Expense, Salaries and Wages Expense, Supplies Expense, Depreciation Expense, and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 lines for each of the other accounts needed. Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value. Do not use a drawing account.
  2. Prepare a trial balance
  3. Prepare an income statement, a statement of owner鈥檚 equity, and an unclassified balance sheet.
  4. Close the ledger
  5. Prepare a post-closing trial balance.

BE3-5 (L02,3) Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years鈥� insurance coverage. Prepare P&G鈥檚 February 1 journal entry and the annual adjusting entry on June 30.

E3-2 (L02) (Corrected Trial Balance) The following trial balance of Wanda Landowska Company does not balance. Yourreview of the ledger reveals the following. (a) Each account had a normal balance. (b) The debit footings in Prepaid Insurance,Accounts Payable, and Property Tax Expense were each understated \(100. (c) A transposition error was made in AccountsReceivable and Service Revenue; the correct balances for Accounts Receivable and Service Revenue are \)2,750 and \(6,690,respectively. (d) A debit posting to Advertising Expense of \)300 was omitted. (e) A \(1,500 cash drawing by the owner was debited to Owner鈥檚 Capital and credited to Cash.

WANDA LANDOWSKA COMPANYTRIAL BALANCEAPRIL 30, 2017

Debit (\)) Credit (\()Cash \) 4,800Accounts Receivable 2,570Prepaid Insurance 700Equipment \( 8,000Accounts Payable 4,500Property Taxes Payable 560Owner鈥檚 Capital 11,200Service Revenue 6,960Salaries and Wages Expense 4,200Advertising Expense 1,100Property Tax Expense 800

Total \)20,890 $24,500

Prepare a correct trial balance.

E3-17 (L02) (Transactions of a Corporation, Including Investment and Dividend) Scratch Miniature Golf and DrivingRange Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March.Mar. 1 Invested \(50,000 cash in the business in exchange for common stock.3 Purchased Michelle Wie鈥檚 Golf Land for \)38,000 cash. The price consists of land \(10,000, building \)22,000, and equipment\(6,000. (Make one compound entry.)5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of \)1,600.6 Paid cash \(1,480 for a one-year insurance policy.10 Purchased golf equipment for \)2,500 from Singh Company, payable in 30 days.18 Received golf fees of \(1,200 in cash.25 Declared and paid a \)500 cash dividend.30 Paid wages of \(900.30 Paid Singh Company in full.31 Received \)750 of fees in cash.Scratch uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable, Common Stock,Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense.InstructionsJournalize the March transactions. (Provide explanations for the journal entries.)

E3-8 (L03) EXCEL (Adjusting Entries) Andy Roddick is the new owner of Ace Computer Services. At the end of August2017, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information relatedto unrecorded expenses that the business incurred during August.1. At August 31, Roddick owed his employees \(1,900 in wages that will be paid on September 1.2. At the end of the month, he had not yet received the month鈥檚 utility bill. Based on past experience, he estimated the billwould be approximately \)600.3. On August 1, Roddick borrowed \(30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%.4. A telephone bill in the amount of \)117 covering August charges is unpaid at August 31.InstructionsPrepare the adjusting journal entries as of August 31, 2017, suggested by the information above.
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