Question

> Problems Group A Learning Objectives 1, 3, 4 P4-29A Preparing financial statements including a classified balance sheet in report form, preparing and posting closing entries, and preparing a post-closing trial balance The adjusted trial balance of Erickson Real Estate Appraisal at June 30, 2018, follows: 1. Net Loss $(9,500)
Please explain your answer. Thank you.

Answer 1

Answer to first 4 parts of the question: 1) 2) ERICKSON REAL ESTATE APPRAISAL ERICKSON REAL ESTATE APPRAISAL Statement of Retained Earnings For the Year Ended June 30, 2018 Income Statement For the Year Ended June 30, 2018 $39,500 Retained Earnings - Beginning Balance Revenues: -$9,500 -$27,300 $48,100 Service Revenue Expenses: Salaries Expense Insurance Expense Supplies Expense Dep. Expense-Building Utilities Expense Interest Expense Total Expenses Net Income (Loss) Less: Net Loss [Ref: Income Statement] Less: Dividends Net decrease in retained earnings Retained Earnings - Ending Balance -$36,800 $2,700 $33,500 $4,400 $300 $8,200 $2,700 $8,500 $57,600 -$9,500

3) ERICKSON REAL ESTATE APPRAISAL Balance Sheet June 30, 2018 Liabilities & Shareholders' Equity Assets Current Liabilities: Current Assets: $4,600 $5,300 $1,500 $1,700 Cash Accounts Receivable Office Supplies Prepaid Insurance Total Current Assets Accounts Payable Interest Payable Salaries Payable $18,700 $8,500 $2,400 $7,600 Unearned Revenue $13,100 $37,200 Total Current Liabilities Long-Term Liabilities: Note Payable (Long-Term) Total Liabilities Shareholders' Equity: Property, Plant and Equipment: $40,000 $77,200 $13,000 Land $82,000 -$25,200 Property, Plant and Equipment, Net Building Accum. Dep.-Building $56,800 $3,000 $2,700 Common Stock $69,800 Retained Earnings [Ref: Statement of Retained Earnings] $5,700 Shareholders' Equity Total Assets $82,900 $82,900 Total Liabilities & Shareholders' equity

4) Closing entries are those entries recorded at the last day of reporting period to close revenue and expense accounts to retained earnings using a temperary account called income summary. When closing entries are recorded for revenues, Income Summary account shall be credited and Revenue accounts shall be debited; Similarly, when closing entries are recorded for expenses, Income Summary account shall be debited and Expense accounts shall be credited. Finally, balance in Income Summary account will represent either Net income or Net loss for the reporting period which shall be closed to Retained Earnings. Therefore, it is clear that dividends account shall be closed to retained earnings whereas other balance sheet related accounts shall not be closed. As a result, ledger accounts of balance sheet items such as assets, liabilities and shareholders' equity only will have ending balance. Balance in both revenue and expense accounts would be zero after recording closing entries. ACCOUNT TITLES AND EXPLANATION DATE DEBIT CREDIT $48,100 Service Revenue Income Summary (To zero out revenue accounts) Income Summary Salaries Expense Insurance Expense Supplies Expense Dep. Expense-Building Utilities Expense Interest Expense (To zero out expense accounts) Retained Earnings Income Summary |(To transfer net loss to Retained Earnings) Income Summary June 30, $48,100 2018 $57,600 June 30 $33,500 $4,400 $300 $8,200 $2,700 $8,500 $9,500 [Ref: Income Statement] June 30 $9,500 $27,300 June 30 $27,300 Dividends (To close dividends to Retained Earnings)