Closing the accounts
The following information was drawn from the accounting records of Croom Company as of December 31. 2011, before the nominal accounts had been closed. The Company’s cash balance was $4,000 and its land account had an $8,500 balance. Notes payable amounted to $5,000.’The balance in the Common Stock account was $3,500. The Company had revenues of $9,600 and expenses of $6,000, and dividends amounted to $600.
Required
a. Identify the accounts that would be closed to Retained Earnings at the end of the accounting period.
b. Assuming that Croom’s beginning balance (as of January 1, 2011) in the Retained Earnings account was $1,000, determine its balance after the temporary accounts were closed at the end of 2011.
c. What amount of net income would Croom Company report on its 2011 income statement?
d. Explain why the amount of net income differs from the amount of the ending Retained Earnings balance. j
e. What are the balances in the revenue, expense, and dividend accounts on January 1, 2012?
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