Supplement to CHAPTER 3
CLOSING ENTRIES AND THE WORK SHEET
Answers to Review Questions
1.
No, the work sheet cannot be used as a substitute for the financial statements.
2. The Adjusted Trial Balance columns should be totaled before the adjusted
amounts are carried to the Income Statement and Balance Sheet columns to
prove the balance. The Income Statement and Balance Sheet columns cannot
5. The totals do not usually agree. Included in the Balance Sheet credit column
are accumulated depreciation accounts, for example, which appear on the bal-
the work sheet because the necessary adjustments are determined on the work
sheet.
7. The posting of adjusting entries to the ledger often follows the preparation of
6. The adjusting entries are posted before the closing entries; otherwise, the
closing entries would not set temporary, or nominal, accounts to zero bal-
163
31 25,620 25,620
31 16,830 8,110
1,200
4,260
915
1,345
1,000
31 8,790 8,790
31 5,000 5,000
Wages Expense
Rent Expense
Retained Earnings
To close the debit balance accounts
Supplies Expense
Income Summary
Repair Revenue
To close the credit balance account
To close the Income Summary account
Retained Earnings
Income Summary
Insurance Expense
Income Taxes Expense
Chapter 3S, E 1.
Depreciation Expense—Repair Equipment
Income Summary
Dec.
2011
SheetStatement
(d) June 30 54,000 Bal. 271,150
(c) June 30 83,150
Bal. 300,300
Bal. 54,000 (d) June 30 54,000
Bal. —
(b) June 30 604,550 (a) June 30 687,700
(c) 30 83,150 Bal. —
(a) June 30 678,100 Bal. 678,100
Bal. —
(a) June 30 9,600 Bal. 9,600
Bal. —
Bal. 351,000 (b) June 30 351,000
Bal. —
Bal. 51,600 (b) June 30 51,600
Bal. —
39,750 (b) June 30 39,750
—
Chapter 3S, P 1.
Maintenance Expense
Wages Expense
Revenue from Court Fees
Retained Earnings
Dividends
2. T accounts opened and balances entered1. Closing entries entered in T accounts
Income Summary
Revenue from Locker Fees
Advertising Expense
Utilities Expense
Bal.
Bal.
Chapter 3S, P 1. (Continued)
$678,100
9,600
$687,700
$351,000
64,800
51,600
39,750
30,000
22,500
20,000
12,000
6,900
6,000 604,550
$ 83,150
$271,150
83,150
$354,300
54,000
Supplies expense
Retained earnings, June 30, 2010
Net income
Subtotal
Less dividends
Chapter 3S, P 1. (Continued)
For the Year Ended June 30, 2011
Miscellaneous expense
Total expenses
Settles Tennis Club, Inc.
Statement of Retained Earnings
Income Statement
For the Year Ended June 30, 2011
Settles Tennis Club, Inc.
3. Income statement, statement of retained earnings, and balance sheet prepared
Revenue from court fees
Maintenance expense
Expenses
Net income
Depreciation expense—building
Depreciation expense—equipment
Revenue from locker fees
Total revenues
Revenues
Advertising expense
Utilities expense
Wages expense
Property taxes expense
Income taxes expense
Chapter 3S, P 1. (Continued)
4. Reason for closing entries explained
Closing entries are journal entries made at the end of the accounting period to
accomplish two purposes: (1) to set the stage for the next accounting period by
Page 1
Post.
Ref. Debit Credit
1 111 5,000
311 5,000
1 511 425
111 425
1 117 480
111 480
2 144 4,200
111 600
212 3,600
5 119 468
212 468
8 512 60
111 60
15 111 400
411 400
21 212 225
111 225
AWD Company
To record receipt of revenue for the
first half of the month
Accounts Payable
Cash
To make payment on account to
Store Rent Expense
Repair Revenue
To pay one month's rent
Repair Equipment
Cash
Date
Common Stock
Advertising Expense
6.
May
2011
Cash
Prepaid Insurance
Cash
Cash
To purchase one-year policy
Cash
seventh down
Chapter 3S, P 2.
Closing entries for May prepared
To issue stock
Cash
Accounts Payable
Accounts Payable
To purchase repair equipment, one-
credit from AWD Company
Repair Supplies
To purchase repair supplies on
General Journal
Description
To purchase newspaper
advertisement
170
Page 2
Post.
Ref. Debit Credit
31 111 975
411 975
31 313 300
2011
last half of the month
To record receipt of revenue for the
Dividends
Chapter 3S, P 2. (Continued)
General Journal
Date Description
CashMay Repair Revenue
Chapter 3S, P 2. (Continued)
$ 4,285
440
169
4,200 $70
3,843
50
Repair Supplies
Repair Equipment
Chapter 3S, P 2. (Continued)
4.
Prepaid Insurance
Income Taxes Payable
A
djusted Trial Balanc
e
Cash
Accumulated Depreciation—Repair Equipment
Accounts Payable
May adjusted trial balance prepared
Javier's Repair Service, Inc.
May 31, 2011
$1,375
$425
299
70
60
50
40 944
$ 431
$—
431
$ 431
Total expenses
Net income
Retained earnings, May 1, 2011
Net income
Subtotal
Income Statemen
t
For the Month Ended May 31, 2011
Javier's Repair Service, Inc.
Income taxes expense
Repair revenue
Store rent expense
Expenses
Revenue
Advertising expense
Insurance expense
Repair supplies expense
Depreciation expense—repair equipment
Chapter 3S, P 2. (Continued)
5. May income statement, statement of retained earnings, and balance shee
t
prepared
Javier's Repair Service, Inc.
Statement of Retained Earnings
For the Month Ended May 31, 2011
$4,285
440
169
Repair Supplies
Post-Closing Trial Balance
May 31, 2011
Javier's Repair Service, Inc.
Cash
Prepaid Insurance
7. May post-closing trial balance prepared
Chapter 3S, P 2. (Continued)
Page 4
Post.
Ref. Debit Credit
1 511 425
111 425
1 212 300
111 300
6 119 863
212 863
15 111 914
411 914
20 512 60
111 60
23 212 600
111 600
30 111 817
411 817
30 313 300
111 300
Accounts Payable
Cash
To make payment on account to AWD
Company
from AWD Company
Cash
Date
To pay one month's rent
Cash
To declare and pay dividend
Dividends
Cash
last half of the month
Repair Revenue
To record receipt of revenue for the
Cash
Chapter 3S, P 2. (Continued)
Closing entries for June prepared
2011
12.
Repair Supplies
To purchase repair supplies on credit
June Store Rent Expense
Company
General Journal
Description
first half of the month
Accounts Payable
Accounts Payable
Cash
To make monthly payment to Motley
Repair Revenue
Cash
To purchase additional advertisement
Advertising Expense
To record receipt of revenue for the
176
Page 5
Post.
Ref. Debit Credit
30 513 40
117 40
30 514 619
119 619
$1,032 – $413 = $619
30 515 70
145 70
30 516 50
213 50
30 411 1,731
314 1,731
30 314 1,264
511 425
512 60
513 40
514 619
515 70
516 50
To close the debit balance accounts
Repair Supplies Expense
Store Rent Expense
Income Summary
Advertising Expense
Insurance Expense
Accumulated Depreciation—Repair
Equipment
income taxes
To record one month's estimated
Closing entries:
Income Summary
Adjusting entries:
Income Taxes Expense
Depreciation Expense—Repair
To close the credit balance account
Repair Revenue
Income Taxes Payable
Depreciation Expense—Repair Equipment
To record depreciation for one month
Equipment
Income Taxes Expense
Chapter 3S, P 2. (Continued)
General Journal
Date
insurance
To record supplies used during June
Repair Supplies
June Insurance Expense
Description
Repair Supplies Expense
2011
Prepaid Insurance
To record one month's expired
177
Page 6
Post.
Ref. Debit Credit
30 314 467
312 467
30 312 300
313 300
Date
June
Retained Earnings
General Journal
account
Chapter 3S, P 2. (Continued)
Description
To close the Income Summary
2011 Income Summary
Dividends
Retained Earnings
To close the Dividends account
178
Ref. Debit Credit Debit Credit
2011
May 1 J1 5,000 5,000
1 J1 425 4,575
1 J1 480 4,095
2 J1 600 3,495
8 J1 60 3,435
15 J1 400 3,835
21 J1 225 3,610
31 J2 975 4,585
31 J2 300 4,285
June 1 J4 425 3,860
1 J4 300 3,560
15 J4 914 4,474
20 J4 60 4,414
23 J4 600 3,814
30 J4 817 4,631
30 J4 300 4,331
Ref. Debit Credit Debit Credit
2011
May 1 J1 480 480
31 J2 40 440
June 30 J5 40 400
Date
Account No. 117
Adjustment
Adjustment
Post.
Post. Balance
Chapter 3S, P 2. (Continued)
Item
Balance
Item
Prepaid Insurance
Date
Cash Account No. 111
179
Ref. Debit Credit Debit Credit
5 J1 468 468
31 J2 299 169
6 J4 863 1,032
30 J5 619 413
Ref. Debit Credit Debit Credit
2 J1 4,200 4,200
Post.
Post. Balance
Date
Date
Account No. 144
Adjustment
Item
Repair Equipment Balance
May
2011
Accumulated Depreciation—Repair Equipment
Adjustment
Account No. 119
Balance
Account No. 145
Chapter 3S, P 2. (Continued)
2011 Item
Repair Supplies
June
May
Post.
Chapter 3S, P 2. (Continued)
Chapter 3S, P 2. (Continued)
Chapter 3S, P 2. (Continued)
Chapter 3S, P 2. (Continued)
$ 4,331
400
413
4,200 $ 140
3,806
100
5,000
Income Taxes Payable
Chapter 3S, P 2. (Continued)
Accumulated Depreciation—Repair Equipment
Javier's Repair Service, Inc.
10.
Prepaid Insurance
June adjusted trial balance prepared
Adjusted Trial Balance
June 30, 2011
Common Stock
Repair Supplies
Repair Equipment
Cash
Accounts Payable
$1,731
$619
425
70
60
50
40 1,264
$ 467
$ 131
467
$ 598
Retained earnings, May 31, 2011
Net income
Subtotal
Chapter 3S, P 2. (Continued)
11. June income statement, statement of retained earnings, and balance shee
t
prepared
For the Month Ended June 30, 2011
For the Month Ended June 30, 2011
Statement of Retained Earnings
Total expenses
Repair revenue
Javier's Repair Service, Inc.
Income taxes expense
Insurance expense
Net income
Javier's Repair Service, Inc.
Revenue
Store rent expense
Advertising expense
Income Statemen
t
Expenses
Repair supplies expense
Depreciation expense—repair equipment
$4,331
400
413
4,200 $ 140
3,806
100
5,000
298
$9,344 $9,344
Accumulated Depreciation—Repair Equipment
Income Taxes Payable
Common Stock
Cash
Prepaid Insurance
Repair Supplies
Repair Equipment
Accounts Payable
Retained Earnings
Post-Closing Trial Balance
June 30, 2011
Javier's Repair Service, Inc.
13.
June post-closing trial balance prepared
Chapter 3S, P 2. (Continued)
187
17,400 2,200 2,200
536 244 244
3,122 468 468
14,000 53,400 53,400
36,000 101,000 101,000
3,160 18,720 18,720
37,800 449,200 449,200
78,622 78,622
494,400 494,400 934,856 934,856
Balance Shee
t
Income Statement
A
djuste
d
Trial Balance
$449,200
45,200 $494,400
$157,860
112,700
36,000
27,000
24,000
20,000
17,400
14,000
3,160
3,122
536 415,778
$ 78,622
$112,648
78,622
$191,270
60,000
$131,270
Beauchamp Theater Corporation
For the Year Ended June 30, 2011
Retained earnings, June 30, 2011
Retained earnings, June 30, 2010
Net income
Subtotal
Less dividends
Beauchamp Theater Corporation
Income Statemen
t
For the Year Ended June 30, 2011
Office supplies expense
Depreciation expense—building
Depreciation expense—theater furnishings
Net income
Revenues
Ticket sales revenue
Theater rental revenue
Utilities expense
Office wages expense
Interest expense
Income taxes expense
Insurance expense
Total revenues
Usher wages expense
2.
Chapter 3S, P 3. (Continued)
Income statement, statement of retained earnings, and balance sheet prepared
Expenses
Depreciation expense—office equipment
Cleaning supplies expense
Total expenses
Statement of Retained Earnings
189
Chapter 3S, P 3. (Continued)
Debit Credit
30 17,400 17,400
30 536 536
$780 – $244 =
30 3,122 3,122
$3,590 – $468 =
30 14,000 14,000
30 36,000
36,000
30 3,160 3,160
30 37,800 37,800
30 860 860
General Journal
$536
To record office supplies used
June Insurance Expense
Prepaid Insurance
$3,122
Date Description
Cleaning Supplies
Cleaning Supplies Expense
To record cleaning supplies used
Adjusting entries:
Chapter 3S, P 3. (Continued)
3. Adjusting and closing entries prepared
2011
period
Accumulated Depreciation—Theater
To record depreciation on office equipment
To record expired insurance
Office Supplies Expense
Depreciation Expense—Building
Accumulated Depreciation—Building
To record depreciation on building for the
Accumulated Depreciation—Office Equipment
Depreciation Expense—Theater Furnishings
Depreciation Expense—Office Equipment
To record depreciation on theater
Wages Payable
To record accrued wages at the end of the
Usher Wages Expense
for the year
year
Furnishings
Office Supplies
To record gift books redeemed
Gift Books Liability
Ticket Sales Revenue
furnishings for the year
191
Chapter 3S, P 3. (Continued)