Question

Brief Exercise 3-11 Nash has year-end account balances of Sales Revenue $853,391, Interest Revenue $14,160, Cost of Goods Sold $512,223, Administrative Expenses $200,960, Income Tax Expense $33,082, and Dividends $20,096. Prepare the year-end closing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

Answer:

Sales revenue 853,391 debit

    Income summary          853,391 credit

-- to close revenues accounts --

Income Summary 746,265 debit

      Cost of Goods Sold            512,223 credit

      Admin expenses                200,960 credit

      Income tax expenses           33,082 credit

-- to close expenses accounts --

Income Summary 20,096 debit

      Dividends                20,096 credit

-- to close dividends accounts --

Income Summary         87,030 debit

      Retained Earnings              87,030 credit

-- to close income summary against retained earnings --

Explanation:

To close the accounting period we need to leave the temporary accounts with a balance of zero. Using the Income Summary account we close revenues, expenses and dividends.  

Then, we calculate the balance of this account and trasnfer it to Retained earnings:

   Income Summary

Debit             Credit

                   853,391

746,265

  20,096                    

Balance:       87,030