The following accounts (normal balances) are listed on B Company’s adjusted trial balance:
Particulars Amount
Service Revenue
$93,600
Salaries Expense
$45,146
Rent Expense
$20,289
Advertising Expense
$7,174
Dividends
$2,794
What is the closing entry for the income summary account?
A. Debit Income summary account and credit dividends account by $2,794.
B. Debit Income summary account and credit retained earnings account by $20,991.
C. Debit income summary account and credit retained earnings by $18,197.
D. Debit retained earnings account and credit Income summary account by $20,991.
The following accounts (normal balances) are listed on B Company’s adjusted trial balance:
| Service Revenue |
$93,600
|
| Salaries Expense |
$45,146
|
| Rent Expense |
$20,289
|
| Advertising Expense |
$7,174
|
| Dividends |
$2,794
|
What is the closing entry for the income summary account?
A. Debit Income summary account and credit dividends account by $2,794.
B. Debit Income summary account and credit retained earnings account by $20,991.
C. Debit income summary account and credit retained earnings by $18,197.
D. Debit retained earnings account and credit Income summary account by $20,991.
Related questions
Chandler, Inc. is owned by Roscoe Chandler and providesappraisal services to individuals and companies wishing to purchaseand sell fine art. Chandler, Inc. began business on January 1,2016, and is just completing its first year of business. Roscoeasks for your help in completing the accounting cycle for thecompany by assisting with the closing process.
Before the closing entries are made, you begin with an adjustedtrial balance. The closing entries are essentially the link fromthe adjusted trial balance to the post-closing trial balance.
Chandler, Inc.
ADJUSTED TRIAL BALANCE
December 31, 2016
| ACCOUNTTITLE | DEBIT | CREDIT | |
|---|---|---|---|
1 | Cash | 76,000.00 | |
2 | Accounts Receivable | 29,000.00 | |
3 | Prepaid Insurance | 16,000.00 | |
4 | Equipment | 60,000.00 | |
5 | Accumulated Depreciation-Equipment | 40,000.00 | |
6 | Accounts Payable | 6,000.00 | |
7 | Salaries Payable | 8,000.00 | |
8 | Income Taxes Payable | 4,000.00 | |
9 | Common Stock | 2,000.00 | |
10 | Retained Earnings | 18,000.00 | |
11 | Dividends | 5,000.00 | |
12 | Income Summary | ||
13 | Fees Earned | 175,600.00 | |
14 | Rent Revenue | 92,000.00 | |
15 | Interest Revenue | 17,200.00 | |
16 | Salaries Expense | 71,000.00 | |
17 | Selling Expense | 25,600.00 | |
18 | Income Taxes Expense | 15,000.00 | |
19 | Depreciation Expense-Equipment | 47,200.00 | |
20 | Insurance Expense | 17,000.00 | |
21 | Miscellaneous Expense | 1,000.00 | |
22 | Totals | 362,800.00 | 362,800.00 |
The final step of the accounting cycle is the closing process.The main goal of this stage of the cycle is to ensure that thebalance of each temporary account is returned to zero and that netincome is transferred to the retained earnings account. The firststep in successfully undertaking the closing process is tounderstand the difference between a temporary account and apermanent account. Roscoe has some questions about the process.
Answer questions (1) - (3) below.
1. If a temporary account has an ending balance of $57,000, whatis its beginning balance for the following accounting period?
2. If a permanent account has an ending balance of $57,000, whatis its beginning balance for the following accounting period?
3. Roscoe will be preparing his yearly financial statementsafter completing Chandler, Inc.âs closing process, and is asomewhat confused about the characteristics of the accounts on hisChart of Accounts. He has started by creating the chart below, andasks for your help in completing it. For each account or type ofaccount listed, choose all descriptions that apply.
| Temporary Account | Permanent Account | Closed to Income SummaryAccount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Yes | No | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset accounts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retained Earnings account | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Liability accounts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends account | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Roscoe has attempted to prepare the closing entries forChandler, Inc. on this panel. Heâs not sure if heâs entered thejournal entries correctly, and asks you to review them. You findthat two of the entries are correct, but two are incorrect. Determine which entries are incorrect, and enter all four of theclosing entries for Chandler, Inc. as of Dec. 31 on the Journalpanel. PAGE 25 JOURNAL
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Salaries Expense | Service Revenue | |||||||
| 6/10 | 3,200 | 6/30 | 8,800 | 6/30 | 15,100 | 6/15 | 6,700 | |
| 6/28 | 5,600 | 6/24 | 8,400 | |||||
| Retained Earnings | Supplies Expense | |||||||
| 6/30 | 2,500 | 6/1 | 12,000 | 6/12 | 600 | 6/30 | 1,300 | |
| 6/30 | 2,000 | 6/24 | 700 | |||||
| Bal. | 11,500 | |||||||
| Rent Expense | Dividends | |||||||
| 6/1 | 3,000 | 6/30 | 3,000 | 6/13 | 1,000 | 6/30 | 2,500 | |
| 6/25 | 1,500 | |||||||
Instructions
(a) Prepare the closing entries that were made. (For multiple debit/credit entries, listamounts from largest to smallest eg 10, 5, 3, 2.)
| Description/Account | Debit | Credit |
| SuppliesExpenseRent ExpenseRetained EarningsDividendsService RevenueIncomeSummarySalaries Expense | ||
| ServiceRevenueDividendsSalaries ExpenseSupplies ExpenseRentExpenseRetained EarningsIncome Summary | ||
| (To closerevenue.) | ||
| ServiceRevenueSupplies ExpenseRent ExpenseSalaries ExpenseRetainedEarningsDividendsIncome Summary | ||
| SuppliesExpenseService RevenueRent ExpenseRetained EarningsIncomeSummaryDividendsSalaries Expense | ||
| RetainedEarningsService RevenueDividendsRent ExpenseIncome SummarySalariesExpenseSupplies Expense | ||
| SuppliesExpenseDividendsService RevenueRetained EarningsIncomeSummarySalaries ExpenseRent Expense | ||
| (To closeexpenses.) | ||
| DividendsRetainedEarningsSupplies ExpenseIncome SummaryService RevenueSalariesExpenseRent Expense | ||
| RetainedEarningsRent ExpenseSalaries ExpenseService RevenueSuppliesExpenseIncome SummaryDividends | ||
| (To close netincome to retained earnings.) | ||
| ServiceRevenueDividendsRent ExpenseRetained EarningsIncome SummarySalariesExpenseSupplies Expense | ||
| RetainedEarningsIncome SummaryRent ExpenseSalaries ExpenseSuppliesExpenseDividendsService Revenue | ||
| (To closedividends to capital.) |
(b) Post the closing entries to Income Summary.
| Income Summary | |||
| June 30 | June 30 | ||
| June30 | 2,000 | ||
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