Closing Entries of a Profitable Company
Gerdes Psychological Services, Inc., closes its temporary accounts once each year on December 31. The company recently issued the following income statement as part of its annual report:
GERDES PSYCHOLOGICAL SERVICES, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2011 | ||
Counseling revenue |
| $225,000 |
|
| |
Advertising expense | $1,800 |
|
Salaries expense | 94,000 |
|
Office supplies expense | 1,200 |
|
Utilities expense | 850 |
|
Malpractice insurance expense | 6,000 |
|
Office rent expense | 24,000 |
|
Continuing education expense | 2,650 |
|
Depreciation expense: fixtures | 4,500 |
|
Miscellaneous expense | 6,000 |
|
Income taxes expense | 29,400 |
|
|
| 170,400 |
Net income |
| $ 54,600 |
The firm's statement of retained earnings indicates that a $6,000 cash dividend was declared and paid during 2011. '
a. Prepare the necessary closing entries on December 31,2011.
b. If the firm's Retained Earnings account had a $92,000 balance on January 1,2011, at what amount should Retained Earnings be reported in the firm's balance sheet dated December 31,2011?
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