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Exercise 6.1 Journalize closing entries. LO 6-1
On December 31, 2019, the ledger of Lopez Company contained the following account balances:
 

Cash	$	31,500	Maria Lopez, Drawing	$	12,000
Accounts Receivable		2,150	Fees Income		46,250
Supplies		1,350	Depreciation Expense		2,000
Equipment		24,500	Salaries Expense		15,500
Accumulated Depreciation		1,750	Supplies Expense		2,250
Accounts Payable		2,250	Telephone Expense		1,850
Maria Lopez, Capital		46,750	Utilities Expense		3,900

Prepare the closing entries for the above transactions.
 

 
 
 
Exercise 6.2 Accounting cycle. LO 6-4
Arrange the steps in accounting cycle in the proper sequence.
 

 
Exercise 6.3 Postclosing trial balance. LO 6-2
From the following list, identify the accounts that will appear on the post-closing trial balance.
(You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answers
and double click the box with the question mark to empty the box for a wrong answers.)
 

   
Exercise 6.4 Financial statements. LO 6-3
Managers often consult financial statements for specific types of information.
Indicate whether each of the following items would appear on the income statement, the statement of owner’s equity, or the balance sheet. 
 

   
Exercise 6.5 Closing entries. LO 6-1
The Income Summary and Linda Carter, Capital accounts for Carter Production Company at the end of its accounting period follow.
 

Income Summary			Account No. 399
				Balance
Date	Description	Debit	Credit	Debit	Credit
2019
Dec. 31	Closing		64,600		64,600
31	Closing	34,700			29,900
31	Closing	29,900			0

 

Linda Carter, Capital			Account No. 301
				Balance
Date	Description	Debit	Credit	Debit	Credit
2019
Dec.  1			108,000		108,000
31	Closing		29,900		137,900
31	Closing	9,800			128,100

Enter the following amounts.
 

   
Exercise 6.6 Closing entries. LO 6-1
The ledger accounts of AXX Internet Company appear as follows on March 31, 2019:
 

ACCOUNT NO.	ACCOUNT	BALANCE
101	Cash	$	65,000
111	Accounts Receivable		35,860
121	Supplies		9,100
131	Prepaid Insurance		23,500
141	Equipment		103,000
142	Accumulated Depreciation—Equipment		39,820
202	Accounts Payable		11,500
301	Aretha Hinkle, Capital		115,000
302	Aretha Hinkle, Drawing		11,500
401	Fees Income		311,000
510	Depreciation Expense—Equipment		19,660
511	Insurance Expense		9,900
514	Rent Expense		31,500
517	Salaries Expense		151,000
518	Supplies Expense		4,100
519	Telephone Expense		5,300
523	Utilities Expense		7,900

All accounts have normal balances.

Required:
Prepare the closing entries.
Post the transactions in to the appropriate ledger accounts. Hint: Be sure to enter beginning balances.
 

 


   
Exercise 6.7 Closing entries. LO 6-1
On December 31, the Income Summary account of Madison Company has a debit balance of $28,000
after revenue of $30,000 and expenses of $58,000 were closed to the account. Madison Wells, Drawing has a debit balance of $3,100
and Madison Wells, Capital has a credit balance of $49,000.

Required:
Record the journal entries necessary to complete closing the accounts.
What is the new balance of Madison Wells, Capital?
 

Problem 6.1A Adjusting and closing entries. LO 6-1
Consumer Research Associates, owned by Gloria Johnson, is retained by large companies to test consumer reaction to new products.
On January 31, 2019, the firm’s worksheet showed the following adjustments data: (a) supplies used, $2,290; (b) expired rent, $12,500;
and (c) depreciation on office equipment, $4,530. The balances of the revenue and expense accounts listed in the Income Statement section
of the worksheet and the drawing account listed in the Balance Sheet section of the worksheet are given below:
 

REVENUE AND EXPENSE ACCOUNTS
401	Fees Income	$	95,000	Cr.
511	Depr. Expense—Office Equipment		4,530	Dr.
514	Rent Expense		12,500	Dr.
517	Salaries Expense		49,000	Dr.
520	Supplies Expense		2,290	Dr.
523	Telephone Expense		1,300	Dr.
526	Travel Expense		10,340	Dr.
529	Utilities Expense		1,200	Dr.

 

DRAWING ACCOUNT
302	Gloria Johnson, Drawing	10,500	Dr.

Required:
Record the adjusting entries in the general journal (transactions 1-3).
Record the closing entries in the general journal (transactions 4-7).

   
 
Problem 6.2A Journalizing and posting adjusting and closing entries and preparing a postclosing trial balance LO 6-1, 6-2
A completed worksheet for The King Group is given below.
 

The King Group
Worksheet
Month Ended December 31, 2019
	Trial Balance						Adjustments								Adjusted Trial Balance						Income Statement					Balance Sheet
Account Name	Debit		Credit			Debit				Credit				Debit			Credit			Debit			Credit			Debit			Credit
Cash	92,700													92,700												92,700
Accounts Receivable	12,300													12,300												12,300
Supplies	6,600								(	a)	2,700			3,900												3,900
Prepaid Advertising	26,400								(	b)	3,300			23,100												23,100
Equipment	67,500													67,500												67,500
Accumulated Depreciation —Equipment									(	c)	2,700						2,700												2,700
Accounts Payable			12,300														12,300												12,300
Delva King, Capital			135,000														135,000												135,000
Delva King, Drawing	8,700													8,700												8,700
Fees Income			83,550														83,550						83,550
Supplies Expense					(	a)	2,700							2,700						2,700
Advertising Expense					(	b)	3,300							3,300						3,300
Depreciation Expense—Equipment					(	c)	2,700							2,700						2,700
Salaries Expense	14,700													14,700						14,700
Utilities Expense	1,950													1,950						1,950
Totals	230,850		230,850				8,700				8,700			233,550			233,550			25,350			83,550			208,200			150,000
Net Income																				58,200									58,200
																				83,550			83,550			208,200			208,200

Required:
Record the adjusting entries in the general journal (transactions 1-3).
Record the closing entries in the general journal (transactions 4-7).
Post the adjusting entries and the closing entries to the general ledger accounts.  Hint: Be sure to enter beginning balances.
Prepare a post-closing trial balance.
Analyze:
How many accounts are listed in the adjusted and post-closing trial balance section?



 

 

   
Problem 6.3A Journalizing and posting closing entries. LO 6-1
On December 31, after adjustments, Gonzalez Company's ledger contains the following account balances:
 

101	Cash	$	46,200	Dr.
111	Accounts Receivable		17,700	Dr.
121	Supplies		3,900	Dr.
131	Prepaid Rent		40,500	Dr.
141	Equipment		63,000	Dr.
142	Accumulated Depreciation—Equip.		1,950	Cr.
202	Accounts Payable		8,400	Cr.
301	Emilio Gonzalez, Capital (12/1/2019)		64,620	Cr.
302	Emilio Gonzalez, Drawing		8,100	Dr.
401	Fees Income		161,040	Cr.
511	Advertising Expense		5,700	Dr.
514	Depreciation Expense—Equip.		990	Dr.
517	Rent Expense		4,500	Dr.
519	Salaries Expense		37,800	Dr.
523	Utilities Expense		7,620	Dr.

Required:
Journalize the closing entries in the general journal.
Post the closing entries to the general ledger accounts. Hint: Be sure to enter beginning balances.
Analyze:
What is the balance of the Salaries Expense account after closing entries are posted?
 



   
Problem 6.4A Worksheet, journalizing and posting adjusting and closing entries, and the post-closing trial balance. LO 6-1, 6-2
A partially completed worksheet for At Home Pet Grooming Service, a firm that grooms’ pets at the owner’s home, follows.

Required:
Complete the worksheet.
Record the adjusting entries in the general journal (transactions 1-3).
Record the closing entries in the general journal (transactions 4-7).
Post the adjusting entries and the closing entries to the general ledger accounts. Hint:  Be sure to enter beginning balances.
Prepare a post-closing trial balance.
Analyze:  
What total debits were posted to the general ledger to complete all closing entries for the month of December?
 




 
 

 
Critical Thinking Problem 6.1 The Closing Process
 
The Trial Balance section of the worksheet for Contemporary Fashions for the period ended December 31, 2019, appears below.
Adjustments data are also given.

ADJUSTMENTS
Supplies used, $3,600
Expired insurance, $2,400
Depreciation expense for machinery, $1,200

Required:
Complete the worksheet.
Prepare an income statement.
Prepare a statement of owner’s equity.
Prepare a balance sheet.
Journalize the adjusting entries in the general journal.
Journalize the closing entries in the general journal.
Prepare a postclosing trial balance.

Analyze:
If the adjusting entry for expired insurance had been recorded in error as a credit to Insurance Expense and a debit to Prepaid

 
 






   
Critical Thinking Problem 6.2 Owner's Equity
Demetria Davis, the bookkeeper for Home Interiors and Designs Company, has just finished posting the closing entries for the year to the ledger.
She is concerned about the following balances:
 

Capital account balance in the general ledger:	$	97,100
Ending capital balance on the statement of owner’s equity:		55,600

Davis knows that these amounts should agree and asks for your assistance in reviewing her work.

Your review of the general ledger of Home Interiors and Designs Company reveals a beginning capital balance of $50,000.
You also review the general journal for the accounting period and find the closing entries shown below.
 

GENERAL JOURNAL				Page 15
Date		Description	Debit	Credit
2019		Closing Entries
Dec.	31	Fees Income	98,000
		Accumulated Depreciation	8,500
		Account Payable	33,000
		Income Summary		139,500
	31	Income Summary	92,400
		Salaries Expense		78,000
		Supplies Expense		5,000
		Depreciation Expense		2,400
		Thomas Richey, Drawing		7,000

Required:
Prepare a general journal entry to correct the errors made.
Reconcile the balance of capital account in the ledger after closing entries have been posted and the ending capital balance of owner's equity.
 

 
 
The Business Center had the transactions listed below during the month of June:
 
TRANSACTIONS
Jesse Campbell started the business with a cash investment of $47,000.
Purchased equipment for $15,500 on credit.
Performed services for $3,400 in cash.
Purchased additional equipment for $3,300 in cash.
Performed services for $4,400 on credit.
Paid salaries of $3,800 to employees.
Received $1,900 cash from charge account customers.
Paid $7,800 to a creditor on account.
Show how each transaction would be recorded in the accounting equation. (Enter decreases to account balances with a minus sign.)
 

   
At the beginning of September, Helen Rojas started Rojas Wealth Management Consulting,
a firm that offers financial planning and advice about investing and managing money.
On September 30, the accounting records of the business showed the following information:
 
Cash $133,800
Accounts receivable 17,400
Office supplies 15,000
Office equipment 151,400
Accounts payable 24,200
Helen Rojas, Capital, September 1, 20X1 108,200
Fees income 313,000
Advertising expense 27,400
Salaries expense 65,400
Telephone expense 4,600
Withdrawals 37,400
 
Prepare an income statement for the month of September 2011.
 

   
What is accrual basis of accounting?
 
Reporting income when it is earned and expenses when they are incurred.
   
A fiscal period consisting of 12 consecutive months is __________________.
 
Fiscal Year
   
What is the 1st step in the Accounting Cycle?
 
Collect and verify source documents.
   
The difference between total revenue and total expenses when total expenses are greater is ________.
 
Net Loss
   
Define Net Income
 
The difference between total revenue and total expenses when total revenue is greater.
   
Define Income Statement.
 
A financial statement showing the revenue and expenses for a fiscal period
   
The length of time for which a business summarizes financial information and reports its financial performance is ____________.
 
Fiscal Period
   
What is a trial balance?
 
A proof of the equality of debits and credits in a general ledger.
   
What is cash basis of accounting?
 
Reporting income when the cash is received and expenses when the cash is paid.
   
When the Income Statement Debit column total is greater than the Income Statement Credit column total on a
work sheet, the business has a net income.
 
False
   
The amount of the supplies used during a fiscal period is an expense.
 
True
   
If the Trial Balance columns are not equal and the difference can be evenly divided by 9, then the
error most likely is a transposed number.
 
True
   
If an amount is written in an incorrect column on a work sheet, a line should be drawn through the
incorrect amount and the correct amount should be written in the correct column.
 
False
   
Two financial statements are prepared from the information on the work sheet.
 
True
   
The accounting concept Consistent Reporting is being applied when a word processing service business
reports revenue per page one year and revenue per hour the next year.
 
False
   
Only accounts with a balance are listed in the Trial Balance columns of a work sheet.
 
False
   
The balance of the Supplies account plus the value of the supplies on hand equals the up-to-date balance
of the Supplies account.
 
False
   
Journals, ledgers, and work sheets are considered permanent records.
 
False
   
The two accounts affected by the adjustment for supplies are Supplies and Supplies Expense.
 
True
   
Many businesses choose a one-year fiscal period that ends during a period of high business activity.
 
False
   
If the Trial Balance columns are not equal and the difference is $50.00, the error is a $25.00
amount written in the wrong column.
 
True
   
In the difference between the totals of Debit and Credit columns on a work sheet can be evenly
divided by 9, then the error is most likely in addition.
 
False
   
If an amount is written in an incorrect column of a work sheet, the error should be erased and the
amount should be written in the correct column.
 
True
   
Adjusting entries must be posted to the general ledger accounts.
 
True
   
Making adjustments to general ledger accounts is an application of the Matching Expenses with
Revenue accounting concept.
 
True
   
Net income on a work sheet is calculated by subtracting the Income Statement Debit column total
from the Income Statement Credit column total.
 
True