Question

1. You have been given the following adjusted ledger balance: Cash Accounts Rec. Pre-paid expenses Land Equip. Accum. Depr. Accts. Pay. Notes Pay. RSC Capital RSC Drawing Income Summary Sales Wage Exp. Maint Exp. Insr. Ex Depr. Exp. $ 100,000 300,000 50,000 100,000 400,000 175,000 150,000 50,000 100,000 25,000 805,000 200,000 75,000 10,000 20,000 Required: Prepare closing journal entries.

Answer 1

Solution

Closing Entries
Date	Accounts and Explanations	Debit	Credit
Dec-31	Sales revenue	$ 805,000.00
	Income Summery		$ 805,000.00
	(Revenue accounts closed)
Dec-31	Income Summery	$ 305,000.00
	Wages expense		$ 200,000.00
	Maintenance expense		$    75,000.00
	Insr. Expense		$    10,000.00
	Depreciation expense		$    20,000.00
	(Expenses Accounts closed)
Dec-31	Income Summery	$ 500,000.00
	RSC Capital		$ 500,000.00
	(To close income summery)
Dec-31	RSC Capital	$    25,000.00
	RSC Drawings		$    25,000.00
	(To close Drawings account)

.Alternatively all revenue can be credited to capital instead of income summery and all expenses would be debited to income summery then there will be no need to create income summery account .