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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

What are closing entries and why are they necessary?

When the accounts of Daniel Barenboim Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.

  1. The prepaid insurance account shows a debit of \(5,280, representing the cost of a 2-year fire insurance policy dated August 1 of the current year.
  2. On November 1, Rent Revenue was credited for \)1,800, representing revenue from a subrental for a 3-month period beginning on that date.
  3. Purchase of advertising materials for \(800 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of \)290 are on hand.
  4. Interest of $770 has accrued on notes payable.

Instructions

Prepare the following in general journal form.

  1. The adjusting entry for each item.
  2. The reversing entry for each item where appropriate.

Agazzi Repair Shop had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (Omit explanations.) Aug. 2 Invested \(12,000 cash and \)2,500 of equipment in the business. 7 Purchased supplies on account for \(500. (Debit asset account.) 12 Performed services for clients, for which \)1,300 was collected in cash and \(670 was billed to the clients. 15 Paid August rent \)600. 19 Counted supplies and determined that only $270 of the supplies purchased on August 7 are still on hand.

Distinguish between cash-basis accounting and accrual-basis accounting. Why is accrual-basis accounting acceptable for most businesses and the cash-basis unacceptable in the preparation of an income statement and a balance sheet?

Do the following events represent business transactions?

Explain your answer in each case

  1. A computer is purchased on account.
  2. A customer returns merchandise and is given credit on account.
  3. A prospective employee is interviewed
  4. The owner of the business withdraws cash from the business for personal use.
  5. Merchandise is ordered for delivery next month.
See all solutions

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