Question

Closing Entries The adjusted trial balance shown below is for Batton, Inc., at December 31: BATTON, INC. Adjusted Trial Balance December 31 Debit Credit Cash $4,000 Accounts Receivable 8,000 Prepaid Insurance 3,600 Equipment 75,000 Accum. Depreciation. - Equipment $12,500 Accounts Payable 600 Common Stock 30,000 Retained Earnings 14,100 Cash Dividends 7,000 Service Fees Earned 101,200 Miscellaneous Income 4,200 Salaries Expense 42,800 Rent Expense 12,900 Insurance Expense 1,800 Depreciation expense 8,000 Income Tax Expense 8,300 Income Tax Payable 8,800 Totals $171,400 $171,400 Required a. Prepare closing entries in general journal form using the Income Summary account. b. After the closing entries are posted, what is the ending balance in Retained Earnings account? c. Prepare a post-closing trial balance.

Answer 1

Requirement a:

Date	Description	Debit	Credit
Dec 31	Service Fees Earned	$101,200
	Miscellaneous Income	$4,200
	Income Summary		$105,400
	[To close revenue accounts]
Dec 31	Income Summary	$73,800
	Salaries expense		$42,800
	Rent expense		$12,900
	Insurance expense		$1,800
	Depreciation expense		$8,000
	Income tax expense		$8,300
	[To close expenses accounts]
Dec 31	Income summary (105,400-73,800)	$31,600
	Retained earnings		$31,600
	[To close income summary account]
Dec 31	Retained earnings	$7,000
	Cash Dividends		$7,000
	[To close dividends account]

Requirement b:

Retained earnings, December 31 $38,700

Retained earnings, Beginning balance	$14,100
Add: net income	$31,600
(Less): dividends	($7,000)
Retained earnings, Ending balance	$38,700

Requirement c:

BATTON, INC.
Post-Closing Trial Balance
December 31
Account title	Debit	Credit
Cash	$4,000
Accounts Receivable	$8,000
Prepaid Insurance	$3,600
Equipment	$75,000
Accum. Depreciation-Equipment		$12,500
Accounts payable		$600
Income tax payable		$8,800
Common stock		$30,000
Retained Earnings		$38,700
Totals	$90,600	$90,600