Shore Salaries Expense insurance Expense Office Supplies Expense (a) 480 (b) 1,2

Question

Shore Salaries Expense insurance Expense Office Supplies Expense (a) 480 (b) 1,260 (c) 2,800 (d) 4,400 Depreciation Expense-Office Equipment Expense- Store Equipment (e) 1.440 10,380 Salaries Payable 10,380 1. Prepare the adjusting entries. 2. Where required, prepare appropriate reversing entries 4S Preparation of Closing Entries from the Work Sheet EZA. The items that follow are from the Income Statement columns of Winter's Shop's work sheet for the vear ended December 31, 2014. Prepare journal en close the entries to The owner, o slse the revenue, expense, Income Summary, and Withdrawals accountThe A. Winter, withdrew S2,500 during the year. Income Statement Debit Account Name Repair Revenue Wages Expense Credit 12,810 4,055 600 2,130 458 672 7.915 4,895 12,810 Rent Expense Supplies Expense Insurance Expense Depreciation Expense-Repair Equipment 12,810 Net Income 12,810 Lo4,5 Adjusting Entries and Preparation of a Balance Sheet E8A. In the partial work sheet for K. Joe Company that follows, the Trial Balance and Income Statement columns have been completed. All amounts are in dollars.

Explanation / Answer

Solution :

1) To close Revenue Account :

Close means to make the balance zero. We see from the adjusted trial balance that our revenue
accounts have a credit balance. To make them zero we want to decrease the balance or do the
opposite. We will debit the revenue accounts and credit the Income Summary account. The credit to
income summary should equal the total revenue from the income statement.

entry would be : Debit Credit

Repair Revenue A/c - 12810

Income Summary A/c 12810

2)To Close Expense A/c :

The expense accounts have debit balances so to close their balances we will do the opposite or
credit the accounts. Just like in the case of revenue account, we will use Income Summary as the offset account but this time
we will debit income summary. The total debit to income summary should match total expenses from the
income statement.

Entry would be: Debit Credit

Income Summary A/c 7915

Wages Expenses 4055

Rent Expenses 600

Supplies Expense 2130

Insurance Expenses 458

Depreciation Expenses- Repair Equipments 672

3) To close Income Summary Account :

At this point, you have closed the revenue and expense accounts into income summary. The balance in
income summary now represents $12810 credit – $7915 debit. It should be — income summary should match net income from the income
statement. We want to remove this credit balance by debiting income summary. We added net income to retained earnings in the statement of retained earnings. We
increase an equity account in a journal entry by giving a credit.

The Entry would be : Debit Credit

Income Summary (12810-7915) 4895

Retained Earnings 4895

If expenses were greater than revenue, we would have net loss. A net loss would decrease retained
earnings so we would do the opposite in this journal entry by debiting Retained Earnings and crediting
Income Summary.

4) To Close Withdrawals Account :

After we add net income (or subtract net loss) on the statement of retained earnings, We subtract any dividends to get the ending retained earnings. This will be the journal entry form
of doing this calculation but be careful because you do not want to use the amount of retained earnings
but Withdrawal. We want to decrease retained earnings (debit) and remove the balance in
withdrawals (credit) for the amount of the withdrawals.

But the company Winters Repair Shop work hasnt with drawn anything , So the entry would be :

Retained Earnings Debit ($)

Withdrawals Account Credit ($)

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