2014
Dec. 31 12,810
31 7,915
31 4,895
31 2,500
To close the expense accounts
Income Summary
To close the Income Summary account
To close the Withdrawals account
A. Winter, Capital
E7A. Preparation of Closing Entries from the Work Sheet
To close the revenue account
Income Summary
Repair Revenue
4-9
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1. 8
12
16
32
8
2.
Note to Instructor: Solutions for Exercises: Set B are provided separately on the Instructor’s
K. Joe Company
Balance Sheet
Assets
December 31, 2014
Wages Expense
Unearned Revenues
Depreciation Expense—Building
Supplies Expense
E8A. Adjusting Entries and Preparation of a Balance Sheet
Insurance Expense
Resource CD and website.
4-10
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1. 2014
June 30 91,092
30 75,136
30 15,956
30 14,400
2.
Trailer Rentals Revenue
Income Summary
D. Anatole, Capital
P1. Preparation of Closing Entries
To close the Withdrawals account
To close the expense accounts
To close the Income Summary account
Income Summary
If closing entries were not made at the end of the accounting period, two serious
Problems
To close the revenue account
problems would arise. First, the income statement accounts and the Withdrawals
4-11
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(d) June 30 54,000 Bal. 471,150
Bal. —
Bal. —
Bal. —
Bal. —
Bal. —
Bal. —
Bal. —
Bal. —
P2. Closing Entries Using T Accounts and Preparation of Financial Statements
Maintenance Expense
Wages Expense
Revenue from Court Fees
J. Kojas, Capital
Income Summary
Revenue from Locker Fees
1. and 2.
Advertising Expense
Utilities Expense
4-12
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Bal. —
Bal. —
Bal. —
Bal. —
Bal. —
Miscellaneous Expense
Depreciation Expense—Building
Property Taxes Expense
Depreciation Expense—Equipment
Supplies Expense
P2. Closing Entries Using T Accounts and Preparation of Financial Statements (Continued)
4-13
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3.
$678,100
$471,150
Carlton Tennis Club
For the Year Ended June 30, 2014
Revenue from court fees
Carlton Tennis Club
Statement of Owner’s Equity
Revenue
For the Year Ended June 30, 2014
Income Statement
P2. Closing Entries Using T Accounts and Preparation of Financial Statements (Continued)
J. Kojas, capital, June 30, 2013
4-14
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$ 26,200
9,600
$ 73,000
4.
June 30, 2014
Liabilities
Carlton Tennis Club
Balance Sheet
Assets
Accounts payable
Closing entries are journal entries made at the end of the accounting period to ac-
complish two purposes: (1) to set the stage for the next accounting period by clear-
P2. Closing Entries Using T Accounts and Preparation of Financial Statements (Concluded)
Cash
Prepaid advertising
4-15
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1. 2014
Dec. 31 Service Revenues 6,676,878
To close the revenue accounts
31 Income Summary 6,223,034
Selling, General, and Administrative
To close the expense accounts
31 Income Summary 475,740
To close the Income Summary account
To close the Withdrawals account
2.
P3. Preparation of Closing Entries
(numbers are in thousands)
Both expenses and cash distributions to owners reduce owner’s capital, but for dif-
ferent reasons. Expenses—the costs of doing business—are summarized in the In-
capital is equal to net income or loss. Withdrawals, on the other hand, are distribu-
income. The balance of the Income Summary account that is transferred to owner’s
4-16
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