Serial Problem, SP 3 (Continued)
Part 7
Closing entries
2013
Dec. 31 Computer Services Revenue …………………….. 403 31,284
Income Summary ……………………………….. 901 31,284
To close the revenue account.
31 Income Summary ……………………………………… 901 17,036
Depreciation Exp–Office Equipment ……. 612 400
Depreciation Exp–Computer Equipment .. 613 1,250
Wages Expense …………………………………. 623 3,875
Financial & Managerial Accounting, 5th Edition
216
Serial Problem, SP 3 (Continued)
Part 8
SUCCESS SYSTEMS
Post-Closing Trial Balance
December 31, 2013
Debit Credit
Cash ……………………………………………………………………. $ 58,160
Accounts receivable …………………………………………….. 5,668
Computer supplies ………………………………………………. 580
Prepaid insurance ………………………………………………… 1,665
Prepaid rent …………………………………………………………. 825
Serial Problem, SP 3 (Continued)
[Note: Ledger includes all entries from prior three months. The Working Papers shorten
the solution by showing account balances as of November 30.]
General Ledger
Cash
Acct. No. 101
Date
Explanation
PR
Credit
Balance
Oct.
1
55,000
2
3,300
51,700
5
2,220
49,480
8
1,420
48,060
15
52,860
17
805
52,055
20
1,940
50,115
22
51,515
31
875
50,640
31
3,600
47,040
Nov.
1
320
46,720
2
51,353
5
1,125
50,228
18
52,436
22
250
52,186
28
384
51,802
30
1,750
50,052
30
2,000
48,052
Dec.
2
1,025
47,027
3
500
46,527
4
50,477
10
750
49,727
14
51,227
20
56,852
28
59,852
29
192
59,660
31
1,500
58,160
Financial & Managerial Accounting, 5th Edition
218
Serial Problem, SP 3 (Continued)
Accounts Receivable
Acct. No. 106
Date
Explanation
PR
Credit
Oct.
6
12
15
4,800
22
1,400
28
Nov.
8
18
2,208
24
Dec.
4
3,950
28
3,000
Computer Supplies
Acct. No. 126
Date
Explanation
PR
Credit
Oct.
3
Nov.
5
Dec.
15
31
3,065
Prepaid Insurance
Acct. No. 128
Date
Explanation
PR
Credit
Oct.
5
Dec.
31
555
Prepaid Rent
Acct. No. 131
Date
Explanation
PR
Credit
Oct.
2
Dec.
31
2,475
Office Equipment
Acct. No. 163
Date
Explanation
PR
Credit
Oct.
1
Accumulated Depreciation—Office Equipment
Acct. No. 164
Date
Explanation
PR
Credit
Dec.
31
400
Serial Problem, SP 3 (Continued)
Computer Equipment
Acct. No. 167
Date
Explanation
PR
Credit
Oct.
1
Accumulated Depreciation—Computer Equipment
Acct. No. 168
Date
Explanation
PR
Credit
Dec.
31
1,250
Accounts Payable
Acct. No. 201
Date
Explanation
PR
Credit
Oct.
3
1,420
8
Dec.
15
1,100
Wages Payable
Acct. No. 210
Date
Explanation
PR
Credit
Dec.
31
500
Unearned Computer Services Revenue
Acct. No. 236
Date
Explanation
PR
Credit
Dec.
14
1,500
Common Stock
Acct. No. 307
Date
Explanation
PR
Credit
Oct.
1
83,000
Retained Earnings
Acct. No. 318
Date
Explanation
PR
Credit
Dec.
31
Closing
14,248
31
Closing
Dividends
Acct. No. 319
Date
Explanation
PR
Credit
Oct.
31
Nov.
30
Dec.
31
31
Closing
7,100
Serial Problem, SP 3 (Continued)
Computer Services Revenue
Acct. No. 403
Date
Explanation
PR
Credit
Oct.
6
4,800
12
1,400
28
5,208
Nov.
2
4,633
8
5,668
24
3,950
Dec.
20
5,625
31
Closing
Depreciation Expense—Office Equipment
Acct. No. 612
Date
Explanation
PR
Credit
Dec.
31
31
Closing
400
Depreciation Expense—Computer Equipment
Acct. No. 613
Date
Explanation
PR
Credit
Dec.
31
31
Closing
1,250
Wages Expense
Acct. No. 623
Date
Explanation
PR
Credit
Oct.
31
Nov.
30
Dec.
10
31
31
Closing
3,875
Insurance Expense
Acct. No. 637
Date
Explanation
PR
Credit
Dec.
31
31
Closing
555
Rent Expense
Acct. No. 640
Date
Explanation
PR
Credit
Dec.
31
31
Closing
2,475
Serial Problem, SP 3 (Concluded)
Computer Supplies Expense
Acct. No. 652
Date
Explanation
PR
Credit
Dec.
31
31
Closing
3,065
Advertising Expense
Acct. No. 655
Date
Explanation
PR
Credit
Oct.
20
Dec.
2
31
Closing
2,965
Mileage Expense
Acct. No. 676
Date
Explanation
PR
Credit
Nov.
1
28
Dec.
29
31
Closing
896
Miscellaneous Expense
Acct. No. 677
Date
Explanation
PR
Credit
Nov.
22
Dec.
31
Closing
250
Repairs Expense—Computer
Acct. No. 684
Date
Explanation
PR
Credit
Oct.
17
Dec.
3
31
Closing
1,305
Income Summary
Acct. No. 901
Date
Explanation
PR
Credit
Dec.
31
Closing
31,284
31
Closing
31
Closing
Reporting in Action — BTN 3-1
1. The revenue recognition principle requires that revenue be recorded
when realized or realizable and earned, not before and not after. Most
companies earn revenue when they provide services and products to
customers.
2. Polaris provides information on revenue recognition in its Note 1 titled
“Organization and Significant Accounting Policies.” They report that
products are sold to the dealer or distributor customer.
3. For year-end December 31, 2010, the profit margin is ($ thousands):
4. The revenue items from its income statement must be identified, and
those would be credited to Income Summary as step 1 in the closing
5. The total expenses that would be debited to Income Summary as step 2
in the closing entry process must be computed. Polaris’s total
expenses for the year ended December 31, 2011, are (in thousands):
Cost of sales ………………………………………………………… $ 1,916,366