Question

Laker Incorporated's fiscal year-end is December 31, 2021. The following is an adjusted trial balance as of December 31. Credit Debit $ 11,000 34,000 25,000 $ Accounts Cash Supplies Prepaid Rent Accounts Payable Notes Payable Common Stock Retained Earnings Dividends Service Revenue Salaries Expense Advertising Expense Rent Expense Utilities Expense Totals 2,000 20,000 35,000 8,000 3,000 55,000 19,000 12,000 9,000 7,000 $120,000 $120,000 Required: 1. Prepare the necessary closing entries. (If no entry is required for a particular transaction/event, select "No Journal Entr Required in the first account field.) View transaction list View journal entry worksheet No General Journal Debit Credit Date December 31, 2021 Service Revenue < Prey 9 of 18 !!! Next >

Answer 1

Credit Debit 55,000 $ Date Particulars Dec 31, 2021 Service revenue Income summary To close income account to income summary $ 55,000 $ 47,000 Dec 31, 2021 Income summary Salaries expense Advertising expense Rent expense Utilities expense To close expense accounts to income summary $ $ $ $ 19,000 12,000 9,000 7,000 $ 3,000 $ 3,000 Dec 31, 2021 Retained earnings Dividends To close dividend account to retained earnings account $ 8,000 $ 8,000 Dec 31, 2021 Income summary Retained earnings To close income summary account to retained earnings account

• At the year-end, all temporary accounts are closed.
• Income and expense accounts are closed income summary account.
• The balance in the income summary account is closed to the retained earnings account. ($55,000 - $47,000 = $8,000)
• Dividend account is not an income statement item, hence directly closed to retained earnings account.
• Next, post closing trial balance is prepared.

Laker Inc. Post Closing Trial Balance Year Ended December 31, 2021 Cash $ 11,000 Supplies $ 34,000 Prepaid rent $ 25,000 Accounts payable Notes payable Common stock Retained earings (8000 + 8000 - 3000) Totals $ 70,000 $ $ $ 2,000 20,000 35,000 13,000 70,000 $