Question

i Requirement 1. Prepare the closing entries for Sunnydale Enterprises at December 31, 2018. How much net income did Sunnydale Enterprises earn during 2018? Prepare a T-account for Retained Earnings to show the December 31, 2018, balance of Retained Earnings.

Answer 1

Ans. 1	First of all all revenues and expenses are closed to income summary account.
	Then the net income is closed to retained earnings
	account and finally dividends are closed to retained earnings account.
Date	Accounts	Debit	Credit
31-Dec	Service revenue	$31,900
	Other revenue	$400
	Income summary		$32,300
	(To close revenue accounts)
31-Dec	Income summary	$26,000
	Cost of services sold		$14,100
	Depreciation expense		$4,600
	Selling, general and administrative expenses		$6,300
	Income tax expense		$1,000
	(To close expenses accounts)
31-Dec	Income summary	$6,300
	Retained earnings		$6,300
	(To close net income)
31-Dec	Retained earnings	$900
	Dividends		$900
	(To close the dividends account)
Ans. 2	*Calculations of Net income :
	Particulars	Amount	Amount
	Service revenue	$31,900
	Other revenue	$400
	Total revenue (a)		$32,300
	Less: Expenses:
	Cost of services sold	$14,100
	Depreciation expense	$4,600
	Selling, general and administrative expenses	$6,300
	Income tax expense	$1,000
	Total expenses (b)		$26,000
	Net Income (a - b)		$6,300
Ans . 3	*Calculations of Ending balance of Retained earnings :
	Particulars	Amount	Amount
	Beginning balance of Retained earnings		$2,200
	Add: Net income		$6,300
	Less: Dividends declared		($900)
	Ending balance of Retained earnings		$7,600
	T Account of Retained Earnings is as follows:
	Retained Earnings Account
	Particulars	Amount	Particulars	Amount
	Dividends declared	$900	Beginning balance	$2,200
	Ending balance (balancing figure)	$7,600	Net income	$6,300
		$8,500		$8,500