Question

The following financial information was taken from the books of Zone Health Club, a small spa and fitness club: Account Balances as of December 31, Year 2 Accounts receivable Accounts payable Salaries payable Cash Dividends Operating expense Prepaid rent Rent expense Retained earnings, Beginning Salaries expense Service revenue Supplies Supplies expense Common stock Unearned revenue Land $ 12,450 6, 200 3,150 36,750 2,000 35,300 1,200 8,400 41,250 14,500 65,400 650 3,150 7,000 6,400 15,000 Required a. Prepare the journal entries necessary to close the temporary accounts at December 31, Year 2, for Zone Health Club. b. What is the balance in the Retained Earnings account after the closing entries are posted?

Answer 1

Income Statement
Revenues:
Service revenue		65,400
Expenses:
Operating expense	35,300
Rent expense	8,400
Salaries expense	14,500
Supplies expense	3,150
Total expenses		-61,350
Net Income		$4,050

Event	General Journal	Debit	Credit
1	Service revenue	$65,400
	Income Summary		$65,400
	( To close revenues)
2	Income Summary	$61,350
	Operating expense		$35,300
	Rent expense		$8,400
	Salaries expense		$14,500
	Supplies expense		$3,150
	( To close expenses)
3	Income Summary	$4,050
	Retained earnings		$4,050
	( To close income summary)
4	Retained earnings	$2,000
	Dividends		$2,000
	( To close dividends)

2.

Statement of Retained Earnings, Year 2
Beginning retained earnings	41,250
Net Income	4,050
	$45,300
Dividends	-2,000
Retained earnings, Ending	$43,300

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