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Item 2

Item 2 5 points

Catena's Marketing Company has the following adjusted trial balance at the end of the current year. Cash dividends of $610 were declared at the end of the year, and 690 additional shares of common stock ($0.10 par value per share) were issued at the end of the year for $2,890 in cash (for a total at the end of the year of 850 shares). These effects are included below:

Catena’s Marketing Company
Adjusted Trial Balance
End of the Current Year
	Debit				Credit
Cash	$	1,360
Accounts receivable		2,390
Interest receivable		110
Prepaid insurance		1,680
Long-term notes receivable		2,870
Equipment		15,600
Accumulated depreciation				$	3,160
Accounts payable					2,380
Dividends payable					610
Accrued expenses payable					3,740
Income taxes payable					2,580
Unearned rent revenue					550
Common Stock (850 shares)					85
Additional paid-in capital					3,545
Retained earnings					1,550
Sales revenue					38,760
Interest revenue					200
Rent revenue					820
Wages expense		19,600
Depreciation expense		1,720
Utilities expense		230
Insurance expense		740
Rent expense		9,000
Income tax expense		2,680
Total	$	57,980		$	57,980

Prepare the closing entry at the end of the current year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Closing entries:

Date	Account title and Explanation	Debit	Credit
Dec.31	Sales revenue	38,760
	Interest revenue	200
	Rent revenue	820
	Income Summary		39,780
	[To close revenue accounts]
Dec.31	Income Summary	33,970
	Wages expense		19,600
	Depreciation expense		1,720
	Utilities expense		230
	Insurance expense		740
	Rent expense		9,000
	Income tax expense		2,680
	[To close expenses accounts]
Dec.31	Income Summary [39,780-33,970]	5,810
	Retained earnings		5,810
	[To close income summary account]

.

ALTERNATIVE:

Please note that instead of above closing entries, we can also prepare Single closing entry as follows,

Date	Account title and Explanation	Debit	Credit
Dec.31	Sales revenue	38,760
	Interest revenue	200
	Rent revenue	820
	Wages expense		19,600
	Depreciation expense		1,720
	Utilities expense		230
	Insurance expense		740
	Rent expense		9,000
	Income tax expense		2,680
	Retained earnings		5,810
	[To close revenues and expenses accounts]