Question

E2-32. Preparing Financial Statements and Closing Process Beneish Company has the following account balances at December 31, the end of its fiscal year. ...... $ 8,000 Debit Credit Cash Accounts receivable... Equipment ......... Accumulated depreciation. Notes payable ... Common stock........ Retained earnings .... Dividends ....... Service fees earned ..... Rent expense...... Salaries expense ..... . Depreciation expense.... Totals . . . . . . . . . . . . 6,500 78,000 $ 14,000 10,000 43,000 20,600 8,000 75,000 18,000 37,100 7,000 $162,600 $162,600 a.Prepare Beneish Corporation's income statement and statement of stockholders' equity for year-end December 31 and its balance sheet as of December 31. The company paid cash dividends of $8,000, and there were no stock issuances or repurchases during the year. b. Prepare journal entries to close Beneish's temporary accounts. c.Set up T-accounts for each account and post the closing entries.

Answer 1

a.

Income Statement for the year ending December 31

Revenue	$         75,000
Rent	$       (18,000)
Salaries	$       (37,100)
Depreciation	$         (7,000)
Net income	$         12,900

Statement of stockholders equity for the year ending December 31

	Common stock	Retained earnings
Balance on Jan 01	$              43,000	$                     20,600
Net income / (loss)		$                     12,900
Dividend paid		$                     (8,000)
Common stock issued		$                              -
Balance on Dec 31	$              43,000	$                     25,500

Balance sheet as at December 31

Assets
Current assets
Cash and cash equivalents		$          8,000
Accounts receivable		$          6,500
Non current assets
Equipment	$         78,000	$        64,000
Less: Accumulated depreciation	$       (14,000)
Total assets		$        78,500
Liabilities and Equity
Liabilities
Notes payable		$        10,000
Stockholders Equity
Common stock		$        43,000
Retained earnings		$        25,500
Total liabilities and stockholders Equity		$        78,500

b) Closing entries

Accounts	Debit	Credit
Service fees earned	$   75,000
Income summary account		$   75,000
To close revenue
Income summary account	$   62,100
Rent		$   18,000
Salaries		$   37,100
Depreciation		$     7,000
To close expenses
Income summary account	$   12,900
Retained earnings		$   12,900
To close income summary

c)

Service fee earned
Income summary	$        75,000	Bal	$        75,000
		Bal closing	$                 -
Rent
Bal	$        18,000	Income summary	$        18,000
		Bal closing	$                 -
Salaries
Bal	$        37,100	Income summary	$        37,100
		Bal closing	$                 -
Depreciation
Accumulated depreciation	$          7,000	Income summary	$          7,000
Bal closing	$                 -
Income summary
Rent	$        18,000	Service fee earned	$        75,000
Salaries	$        37,100
Depreciation	$          7,000
Retained earnings	$        12,900
		Bal closing	$                 -
Dividends
Cash	$          8,000	Retained earnings	$          8,000
		Bal closing	$                 -
Retained earnings
Dividend	$          8,000	Bal	$        20,600
		Income summary	$        12,900
		Bal closing	$        25,500
Cash
Bal	$          8,000
Bal closing	$          8,000
Account receivable
Bal	$          6,500
Bal closing	$          6,500
Equipment
Bal	$        78,000
Bal closing	$        78,000
Accumulated depreciation
		Bal	$          7,000
		Depreciation	$          7,000
		Bal closing	$        14,000
Notes payable
		Bal	$        10,000
		Bal closing	$        10,000
Common stock
		Bal	$        43,000
		Bal closing	$        43,000