Question

  

After the accounts have been adjusted at January 31, the end of the year, the following balances are taken from the ledger of Harrison's Dog Walking Service Company:

Harrison Taylor, Capital	$349,000
Harrison Taylor, Drawing	6,000
Fees Earned	124,600
Wages Expense	29,000
Rent Expense	43,000
Supplies Expense	7,300
Miscellaneous Expense	5,700

Required:

Journalize the entries required to close the accounts. Refer to the Chart of Accounts for exact wording of account titles.

Can anyone please help solve this.

Answer 1

In the closing entries, all the revenue and expenses accounts are transferred to income summary account. And then income summary account is closed by transferring its balance to retained earnings account. Drawings are closed by transferring their balance to capital account.

In the journal entries below, the third entry is for transferring the balance in income summary i.e. net income, to retained earnings account. This balance is arrived at as per below:

Net income = Fees earned - Wages expense - Rent expense - Supplies expense - Miscellaneous expense

Net income = $124600 - $29000 - $43000 - $7300 - $5700

Net income = $39600

Required journal entries are:

Date	Description	Debit	Credit
(i)	Fees earned	124600
	Income summary		124600
	(for closing fees earned account to income summary)
(ii)	Income summary	85000
	Wages expense		29000
	Rent expense		43000
	Supplies expense		7300
	Miscellaneous expense		5700
	(for closing expense accounts to income summary)
(iii)	Income summary	39600
	Retained earnings		39600
	(for closing income summary account)
(iv)	Capital	6000
	Drawings		6000
	(for closing drawings to capital account)