Question

Required information Learning Objective 04-P2: Describe and prepare closing entries. Closing entries involve four steps: (1) close credit balances in revenue (and gain) accounts to Income Summary, (2) close debit balances in expense (and loss) accounts to Income Summary, (3) close Income Summary to the capital account, and (4) close withdrawals account to owner's capital Part 2 of 2 0.5 points Closing Entries Illustration Closing Process Knowledge Check 01 The company's adjusted trial balance as follows includes the following accounts balances: Cash, $15,000: Equipment, $85,000 Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Owner's Capital $59.000: Withdrawals, $2,000; Fees Eamed. $56,000; Depreciation Expense, $25,000, and Salaries Expense, $23,000. All accounts have normal balances Prepare the first closing entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns Answer is complete but not entirely correct. No Date General Journal Credit Debit 56.000 1 Do 31 56.000 * 8.000 Fcos carned Income summary Income summary Owner's Capital Owner's Capital Owner's Withdrawals 8.000 2.000 2.000

Answer 1

Trial balance:

Credit Trial Balance Accounts Debit Cash $ 15,000 Equipment $ 85,000 Accumulated Depreciation Accounts Payable Capital Account Withdrawals $ 2,000 Fees Earned Depreciation Expense $ 25,000 Salaries Expense $ 23,000 $ 150,000 $ $ 25,000 10,000 59,000 $ 56,000 $ 150,000

Credit Date 31-Dec Debit 56,000 $ Account titles Fees Earned Income Summary (to close revenue account) $ 56,000 31-Dec $ 48,000 Income Summary Depreciation Expense Salaries Expense (to close expense accounts) $ $ 25,000 23,000 8,000 $ 8,000 31-Dec Income Summary Owner's Capital (to close net income to capital account) Net income = Total revenue - Total expenses = $56,000 - 48,000 = $8,000 31-Dec $ 2,000 Owner's Capital Owner's Withdrawals (to close withdrawals to capital account) $ 2,000

Credit Post Closing Trial Balance Accounts Debit Cash $ 15,000 Equipment $ 85,000 Accumulated Depreciation Accounts Payable Capital Account $ 100,000 $ $ $ $ 25,000 10,000 65,000 100,000

Capital Account Balance = Beginning Balance + Net Income - Withdrawals = $59,000 + $8,000 - $2,000 = $65,000