Question

On December 31, 20X1, the Income Statement section of the worksheet is shown below. The balance of Ally Logan’s drawing account is $28,000. INCOME STATEMENT COLUMNS ACCOUNT NAME DEBIT CREDIT Income Summary $ 59,000 $ 65,000 Sales 230,000 Sales Returns and Allowances 5,700 Interest Income 720 Purchases 83,000 Freight In 3,500 Purchases Returns and Allowances 2,500 Purchases Discounts 3,100 Sales Salaries Expense 49,000 Office Salaries Expense 19,700 Office Supplies Expense 820 Utilities Expense 4,700 Payroll Taxes Expense 2,300 Uncollectible Accounts Expense 2,400 Depr. Expense - Office Equipment 700 Totals 230,820 301,320 Net Income 70,500 $ 301,320 $ 301,320 Prepare the closing entries that should be made in the general journal.

Answer 1

Answer:

Closing entries are follows;

Sales Revenue (Dr.) $230,000

Interest Income (Dr.) $720

Purchase returns and Allowances (Dr.) $2,500

Purchase Discounts (Dr.) $3,100

Income Summary (Cr.) $236,320

Income Summary (Dr.) $171,000

Sales Return and Allowances (Cr.) $5,700

Purchases (Cr.) $83,000

Freight In (Cr.) $3,500

Sales Salaries Expense (Cr.) $49,000

Office Salaries Expense (Cr.) $19,700

Utilities Expense (Cr.) $4,700

Payroll Taxes Expense (Cr.) $2,300

Uncollectible Accounts Expense (Cr.) $2,400

Depreciation Expense - Office Equipment (Cr.) $700

Explanation:

The closing entries are prepared every month end. These entries are prepared to close all the open account balances. The debit balances are closed with income summary account debited and all the debit balances are credited. Any necessary adjustments are made that occur after the recording of transaction.