Question

8. McGregor Insurance Agency started the year with a beginning Retained Earnings balance of $27,500. During the year, McGregor Insurance Agency earned $34,000 of Service Revenue and incurred $23,500 of various expenses. Dividends of $12,000 from the business were paid to stockholders. After the closing entries are recorded and posted, what will be the balance of Retained Earnings? Post the beginning balance and closing entry amounts to the Retained Earnings account. Use a "Bal" posting reference to show the beginning and ending balance of the Retained Earnings account. Use a "Clos." posting reference to show the amounts that are posted while closing the books. The revenue and expense amounts should be combined into one closing entry for net income (like you are closing the Income Summary account). (1) |(3) Retained Earnings D ||(2) N (1) O (2) O Bal. Clos. Bal. Clos. (3) O Bal. Clos. (4) O Bal. O Clos. (5) O Bal. O Clos. (6) O Bal. O Clos.

Answer 1

			McGragor Insurance agency
			Income Statement
			Particulars	Amount $
			Revenue
			Service revenue	34,000
			Total Revenue	34,000
			Expenses
			Various expenses	23,500
			Total Expenses	23,500
			Net Income for the current period	10,500
	Journal entries
	Date	Dr/Cr	Particulars	Debit $	Credit $
		Debit	Income statement	10,500
		Credit	Retained earning		10,500
			(To record the transfer the current year income to retained earning account)
	Date	Dr/Cr	Particulars	Debit $	Credit $
	December 31	Debit	Retained earning	120,000
		Credit	Dividend payable/Cash		120,000
			(To record the dividend payable/paid for the current year to stock holder)
	Retained earning account
	Particulars	Debit $	Particulars	Credit $
	To Opening Bal	27,500	By Dividend payable /cash	12,000
	To Income statement	10,500	By Closing bal	26,000
	Total	38,000	Total	38,000	-