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5
The Accounting Cycle
2. Adjusting entries must be journalized because the ledger needs to be brought up to
date before the beginning of the next accounting cycle.
3. Reject. Closing cleans up the ledger so that only permanent accounts have a
4. Temporary accounts are closed at the end of the accounting cycle and have no
6. The four steps of closing are as follows:
A. Revenue closed to Income Summary.
7. Income Summary summarizes revenue and expenses in the closing process. It is a
temporary account located in the general ledger.
9. Assets, contra assets, liabilities, and the ending figure for capital are listed on a post-
closing trial balance.
10. Disagree; closing entries are usually prepared at the end of the fiscal year. Closing
11. The question in the case is whether Burton should purchase 50% of his orders from
Grant Co. Although Burton is offered a free vacation, he should not let this affect his
SOLUTIONS TO CONCEPT CHECKS
1.
General Journal
Page 3
Date
Account Titles
Dr.
Cr.
Jan.
31
Insurance Expense
510
7
5
00
Prepaid Insurance
115
7
5
00
31
Supplies Expense
514
4
6
00
Store Supplies
116
4
6
00
31
Depreciation Expense, Store Equipment
512
1
0
6
00
Accumulated Depreciation, Store
Equipment
119
1
0
6
00
31
Salaries Expense
516
7
8
00
Salaries Payable
210
7
8
00
Salaries Payable 210
78 1/31 GJ3
Insurance Expense 510
GJ3 1/31 75
Depr. Expense, Store Equip. 512
GJ3 1/31 106
Supplies Expense 514
GJ3 1/31 46
Salaries Expense 516
73
GJ3 1/31 78
2. Step 1: Close total revenue of $200 to Income Summary.
3.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Adjusting Entries
Dec.
31
Taxi Fees
1
2
0
0
00
Income Summary
1
2
0
0
00
31
Income Summary
2
2
8
00
Gas Expense
1
4
0
00
Advertising Expense
3
1
00
Depr. Expense, Taxi
5
7
00
31
Income Summary
9
7
2
00
Mark Beckham, Capital
9
7
2
00
31
Mark Beckham, Capital
1
9
00
Mark Beckham, Withdrawals
1
9
00
4.
Income Summary
314
228
1,200
Clo. 972
972 Bal.
Income Summary is a temporary account because its balance is not carried over from one
accounting period to another.
5.
Mark Beckham, Capital
310
19
70
972
1,023
Bal.
SOLUTIONS TO SET A EXERCISES
5A-1.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Adjusting Entries
Dec.
31
Rent Expense
1
3
0
0
00
Prepaid Rent
1
3
0
0
00
31
Office Supplies Expense
4
5
0
00
Office Supplies
4
5
0
00
31
Depreciation Expense, Equipment
3
7
5
00
Accumulated Depreciation, Equipment
3
7
5
00
31
Salaries Expense
6
0
0
00
Salaries Payable
6
0
0
00
EXERCISES (CONTINUED)
5A-3.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Closing Entries
Oct.
31
Fees Earned
55
0
0
0
00
Income Summary
55
0
0
0
00
31
Income Summary
18
7
0
0
00
Rent Expense
7
5
0
0
00
Wage Expense
8
1
0
0
00
Insurance Expense
1
3
0
0
00
Depreciation Expense, Office
Equipment
1
8
0
0
00
31
Income Summary
36
3
0
0
00
J. Kirsch, Capital
36
3
0
0
00
31
J. Kirsch, Capital
5
0
0
0
00
J. Kirsch, Withdrawals
5
0
0
0
00
EXERCISES (CONTINUED)
5A-4.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Closing Entries
Aug.
31
Salon Fees
3
3
0
0
00
Income Summary
3
3
0
0
00
31
Income Summary
2
9
2
5
00
Insurance Expense
2
7
5
00
Wage Expense
4
0
0
00
Rent Expense
1
8
0
0
00
Depreciation Expense, Equipment
4
5
0
00
31
Income Summary
3
7
5
00
M. Fahy, Capital
3
7
5
00
31
M. Fahy, Capital
1
0
0
00
M. Fahy, Withdrawals
1
0
0
00
SOLUTIONS TO SET B EXERCISES
5B-1.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Adjusting Entries
Oct.
31
Rent Expense
1
2
0
0
00
Prepaid Rent
1
2
0
0
00
31
Office Supplies Expense
4
0
0
00
Office Supplies
4
0
0
00
31
Depreciation Expense, Equipment
2
0
0
00
Accumulated Depreciation, Equipment
2
0
0
00
31
Salaries Expense
2
0
0
0
00
Salaries Payable
2
0
0
0
00
EXERCISES (CONTINUED)
5B-3.
Date
201X
Account Titles and Description
P
R
Dr.
Cr.
Closing Entries
July
31
Fees Earned
41
0
0
0
00
Income Summary
41
0
0
0
00
31
Income Summary
19
7
0
0
00
Rent Expense
7
5
0
0
00
Wage Expense
8
2
0
0
00
Insurance Expense
3
1
0
0
00
Depreciation Expense, Office
Equipment
9
0
0
00
31
Income Summary
21
3
0
0
00
J. Kohl, Capital
21
3
0
0
00
31
J. Kohl, Capital
3
0
0
0
00
J. Kohl, Withdrawals
3
0
0
0
00
EXERCISES (CONTINUED)
5B-4.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Closing Entries
Mar.
31
Salon Fees
5
3
0
0
00
Income Summary
5
3
0
0
00
31
Income Summary
1
1
0
0
00
Insurance Expense
3
0
0
00
Wage Expense
1
0
0
00
Rent Expense
2
0
0
00
Depreciation Expense, Equipment
5
0
0
00
31
Income Summary
4
2
0
0
00
M. Faulks, Capital
4
2
0
0
00
31
M. Faulks, Capital
1
7
0
0
00
M. Faulks, Withdrawals
1
7
0
0
00
