Question

A partial unadjusted trial balance for Air Cargo Company reflected the following: Account Balance Debits Credits Service revenue 80,000 Operating expenses 53,000 Wage expense 28,000 Wages payable -0 Interest receivable 8,000 Interest revenue 9,000 Subsequently, Air Cargo Company recorded the following adjusting entries at the end of the accounting year, December 31, 2019: Wages expense 2,000 Wages payable 2,000 Interest receivable 1,000 Interest revenue 1,000 Income Tax Expense 3,000 Income Tax Payable 3,000 Given the information above, prepare the closing entry for Air Cargo Company at December 31, 2019. (10 points)

Answer 1

Solution:

Closing entry of Air Cargo Company at December 31

1.Close Revenue Accounts

Debit Credit

Sales revenue 80000

Interest Revenue 10000

Income Summary 90000

2.Close Expense accounts

Debit   Credit

Income Summary 86000

Operating expenses 53000

Wages expenses 30000

Income Tax expense 3000

3. Close Income Summary account

Debit Credit

Income Summary (90000 - 86000) 4000

Retained Earnings 4000

4. Close Dividends account

Debit Credit

Retained Earnings 0

Dividends 0

Here Air Cargo company did not pay dividends this year.