5
The Accounting Cycle
Completed
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
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
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, contra liabilities, and the ending figure for
capital are listed on a post-closing trial balance.
10. Disagree; closing entries are prepared at the end of the fiscal year. Closing
11. The question in the case is whether Burton should purchase 50% of his
1.
General Journal
Page 3
Date
Account Titles
Dr.
Cr.
Aug.
31
Insurance Expense
510
1
5
00
115
31
Supplies Expense
514
1
2
00
Store Supplies
116
1
2
00
31
Depreciation Expense, Store Equipment
512
9
00
119
9
31
Salaries Expense
516
2
7
Salaries Payable
210
00
Prepaid Insurance
1
5
00
Prepaid Insurance 115
150
15 8/31 GJ3
Store Supplies 116
Acc. Dep., Store Equip. 119
Salaries Payable 210
27 8/31 GJ3
Insurance Expense 510
GJ3 8/31 15
Depr. Expense, Store Equip. 512
Supplies Expense 514
GJ3 8/31 12
Salaries Expense 516
2. Step 1: Close total revenue of $800 to Income Summary.
Step 2: Close total expenses of $1,070 to Income Summary.
3.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Closing Entries
Mar.
31
Taxi Fees
5
0
0
00
1
5
0
00
31
Income Summary
2
7
6
00
1
3
0
00
Advertising Expense
4
Depr. Expense, Taxi
1
0
6
Income Summary
2
2
4
1
2
2
4
2
7
2
7
4.
Income Summary
314
276
1,500
5.
Max Bison, Capital
310
SOLUTIONS TO SET A EXERCISES
5A-1.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Adjusting Entries
Jan.
31
Rent Expense
5
0
0
00
Prepaid Rent
1
5
0
0
00
31
Office Supplies Expense
6
5
0
00
Office Supplies
6
5
0
00
31
Depreciation Expense, Equipment
3
2
5
00
Accumulated Depreciation, Equipment
3
2
5
00
31
Salaries Expense
8
0
0
Salaries Payable
8
0
0
00
5A-2.
TEMPORARY
PERMANENT
WILL BE CLOSED
1. Income Summary
X
X
2. Jan Ralls, Capital
X
3. Rent Expense
X
X
4. Jan Ralls, Withdrawals
X
X
5. Fees Earned
X
X
6. Accounts Payable
X
7. Cash
X
5A-3.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Closing Entries
May
31
Fees Earned
61
0
0
0
00
Income Summary
61
0
0
0
00
1
0
00
9
00
9
00
31
Income Summary
43
9
0
0
00
EXERCISES (CONTINUED)
5A-4.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Closing Entries
May
31
Salon Fees
4
8
0
0
00
Income Summary
4
8
0
0
00
31
Income Summary
2
7
7
5
00
Insurance Expense
7
5
00
Wage Expense
1
1
0
0
00
Rent Expense
1
0
0
0
00
Depreciation Expense, Equipment
6
0
0
00
31
Income Summary
2
0
2
5
00
M. Fernendez, Capital
2
0
2
5
00
31
M. Fernendez, Capital
7
0
0
00
M. Fernendez, Withdrawals
7
0
0
00
5A-5.
WEY CO.
POST-CLOSING TRIAL BALANCE
AUGUST 31, 201X
Dr.
Cr.
Cash
26
0
0
0
00
SOLUTIONS TO SET B EXERCISES
5B-1.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Adjusting Entries
Mar.
31
Rent Expense
9
0
0
00
9
0
00
31
Office Supplies Expense
3
0
0
00
3
0
00
31
Depreciation Expense, Equipment
3
2
5
00
3
2
5
00
31
Salaries Expense
0
0
0
00
5B-2.
TEMPORARY
PERMANENT
WILL BE CLOSED
1. Income Summary
X
X
2. Jen Rich, Capital
X
3. Salary Expense
X
X
4. Jen Rich, Withdrawals
X
X
5. Fees Earned
X
X
6. Accounts Payable
X
7. Cash
X
EXERCISES (CONTINUED)
5B-3.
Date
201X
Account Titles and Description
P
R
Dr.
Cr.
Closing Entries
Aug.
31
Fees Earned
33
0
0
0
00
0
31
Income Summary
21
0
0
0
00
Rent Expense
0
0
00
1
2
0
0
00
Equipment
31
Income Summary
12
0
0
0
00
31
J. Kohl, Capital
4
0
0
0
00
5B-4.
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Closing Entries
Oct.
31
Salon Fees
2
3
0
0
00
Income Summary
2
3
0
0
00
31
Income Summary
1
5
5
0
00
Insurance Expense
1
5
0
00
Wage Expense
8
0
0
00
Rent Expense
4
0
0
00
Depreciation Expense, Equipment
2
0
0
00
31
Income Summary
7
5
0
00
M. Figg, Capital
7
5
0
00
31
M. Figg, Capital
1
9
0
0
00
M. Figg, Withdrawals
1
9
0
0
00
5B-5.
WINTER CO.
POST-CLOSING TRIAL BALANCE
JULY 31, 201X
Dr.
Cr.
Cash
17
0
0
0
00
Dep. Exp., D. Eq.
Salaries Payable
PROBLEM 5A-1
(1)
Balance Sheet
Income Statement
DAFFY’ S DANCE STUDIO
WORKSHEET
FOR THE MONTH ENDED NOVEMBER 30, 201X
100
1,800
Adj. Trial Balance
100
1,800
Adjustments
(a) 100
(b) 1,800
Trial Balance
Insurance Exp.
D. Supplies Exp.
1,000
1,900
600
200
11,100
1,000
200
900
1,900
600
200
(d) 500
Prepaid Insurance
Dance Supplies
Dance Equipment
Acc. Dep., D. Eq.
Accounts Payable
D. Dominico, Cap.
D. Dominico, With.
Salaries Exp.
Telephone Exp.
PROBLEM 5A-1 (CONCLUDED)
(2)
DAFFY’S DANCE STUDIO
GENERAL JOURNAL PAGE 3
Date
201X
Account Titles and Description
PR
Dr.
Cr.
30
Insurance Expense
1
0
0
00
1
0
0
30
Dance Supplies Expense
1
8
0
0
00
Dance Supplies
1
8
0
0
00
2
5
0
0
2
5
0
0
30
Salaries Expense
5
0
0
00
Salaries Payable
5
0
0
00
30
Dance Fees Earned
22
4
0
0
00
4
0
0
30
Income Summary
7
1
0
0
00
1
9
0
0
6
0
0
2
0
0
1
0
0
1
8
0
0
2
5
0
0
30
Income Summary
15
3
0
0
00
3
0
0
00
9
0
0
9
0
0
PROBLEM 5A-2
(1)
PENNINGTON’S CLEANING SERVICE
GENERAL JOURNAL
PAGE
2
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Adjusting Entries
Dec
31
Insurance Expense
517
3
8
0
00
Prepaid Insurance
114
3
8
0
00
31
Cleaning Supplies Expense
518
2
2
4
00
Cleaning Supplies
115
2
2
4
00
Depreciation Expense, Auto
5
0
Accumulated Depreciation, Auto
122
1
5
0
00
31
Salaries Expense
513
3
2
0
00
Salaries Payable
213
3
2
0
00
Closing Entries
31
Cleaning Fees
412
4
6
8
0
00
Income Summary
314
4
6
8
0
00
31
Income Summary
314
2
6
6
4
00
Salaries Expense
513
1
3
1
0
00
1
0
Advertising Expense
515
3
1
0
00
Gas Expense
516
8
0
00
8
0
Cleaning Supplies Expense
518
2
2
4
00
Depreciation Expense, Auto
519
1
5
0
00
31
Income Summary
314
2
0
1
6
00
B. Pennington, Capital
312
2
0
1
6
00
31
B. Pennington, Capital
312
5
5
0
00
B. Pennington, Withdrawals
313
5
5
0
00
PROBLEM 5A-2 (CONTINUED)
CASH
ACCOUNT NO. 112
201X
Explanation
Ref.
Debit
Credit
Debit
Credit
Dec.
31
Balance
√
1
3
0
0
00
Date
Post
Balance
PREPAID INSURANCE ACCOUNT NO. 114
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
31
Adjusting
GJ2
3
8
0
00
3
6
0
00
CLEANING SUPPLIES
ACCOUNT NO. 115
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Dec.
31
Balance
√
3
8
0
00
31
Adjusting
GJ2
2
2
4
00
1
5
6
00
AUTO
ACCOUNT NO. 121
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Dec.
31
Balance
√
3
5
7
0
00
ACCUMULATED DEPRECIATION, AUTO
ACCOUNT NO. 122
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Dec.
31
Balance
√
8
4
0
31
Adjusting
GJ2
1
5
0
00
9
9
0
PROBLEM 5A-2 (CONTINUED)
ACCOUNTS PAYABLE
ACCOUNT NO. 212
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
2
SALARIES PAYABLE
ACCOUNT NO. 213
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
GJ2
3
B. PENNINGTON, CAPITAL
ACCOUNT NO. 312
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Dec.
2
3
GJ2
5
3
8
B. PENNINGTON, WITHDRAWALS
ACCOUNT NO. 313
201X
Explanation
Ref.
Debit
Credit
Debit
Credit
Dec.
5
0
GJ2
5
Date
Post
Balance
INCOME SUMMARY
ACCOUNT NO. 314
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Dec.
GJ2
6
GJ2
6
GJ2
0
PROBLEM 5A-2 (CONTINUED)
CLEANING FEES
ACCOUNT NO. 412
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Dec.
Balance
6
8
0
Closing
GJ2
4
0
SALARIES EXPENSE
ACCOUNT NO. 513
201X
Explanation
Ref.
Debit
Debit
Credit
Dec.
Balance
9
0
Adjusting
GJ2
0
1
1
0
Closing
GJ2
1
0
Date
Post
Balance
TELEPHONE EXPENSE
ACCOUNT NO. 514
201X
Explanation
Ref.
Debit
Debit
Credit
Dec.
Balance
1
0
Closing
GJ2
1
0
Date
Post
Balance
ADVERTISING EXPENSE
ACCOUNT NO. 515
201X
Explanation
Ref.
Debit
Debit
Credit
Dec.
Balance
1
0
Closing
GJ2
1
0
Date
Post
Balance
GAS EXPENSE
ACCOUNT NO. 516
201X
Explanation
Ref.
Debit
Credit
Debit
Credit
Dec.
Balance
8
0
Closing
GJ2
8
0
Date
Post
Balance
PROBLEM 5A-2 (CONCLUDED)
INSURANCE EXPENSE
ACCOUNT NO. 517
Ref.
Credit
Dec.
GJ2
8
0
8
0
GJ2
8
0
Date
Post
Balance
CLEANING SUPPLIES EXPENSE ACCOUNT NO. 518
Explanation
Ref.
Credit
Dec.
GJ2
2
4
2
4
GJ2
2
4
Date
Post
Balance
DEPRECIATION EXPENSE, AUTO ACCOUNT NO. 519
Explanation
Ref.
Credit
Dec.
GJ2
5
0
5
0
GJ2
5
0
Date
Post
Balance
(2)
PENNINGTON’S CLEANING SERVICE
POST-CLOSING TRIAL BALANCE
DECEMBER 31, 201X
Dr.
Cr.
Cash
1
0
Prepaid Insurance
6
Cleaning Supplies
5
Accumulated Depreciation, Auto
0
Accounts Payable
4
Salaries Payable
0
B. Pennington, Capital
3
2
5
8
5
6
PROBLEM 5A-3
PANJI’S PLOWING
GENERAL JOURNAL
PAGE 1
Date
201X
Account Titles and Description
PR
Dr.
Cr.
1
Cash
111
00
Snow Equipment
123
9,600
00
P. Maki, Capital
311
00
Owner Investment
1
Prepaid Rent
114
1,500
00
Cash
111
1,500
00
Three Mos. Rent Paid in Advance
4
Office Equipment
121
6,000
00
Accounts Payable
211
6,000
00
Bought Equipment on Account
6
Snow Supplies
115
700
00
Cash
111
700
00
Cash Purchases of Supplies
8
Cash
111
7,000
00
Plowing Fees
411
7,000
00
Cash Fees Earned
12
312
6,000
00
Cash
111
6,000
00
Owner Withdrawal
20
Accounts Receivable
112
2,500
00
Plowing Fees
411
2,500
00
Fees Earned on Account
26
Salaries Expense
511
1,800
00
Cash
111
1,800
00
Paid Salaries
PROBLEM 5A-3 (CONTINUED)
PANJI’S PLOWING
GENERAL JOURNAL
PAGE 2
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Nov.
28
Accounts Payable
211
3,000
00
Cash
111
3,000
00
Paid On Account
29
Advertising Expense
512
900
00
Accounts Payable
211
900
00
Advertising Bill Received
30
Telephone Expense
513
160
00
Cash
111
160
00
Paid Telephone Bill
Adjusting Entries
30
Snow Supplies Expense
515
400
00
Snow Supplies
115
400
00
30
Rent Expense
514
500
00
Prepaid Rent
114
500
00
30
Depreciation Expense, Office Equip.
516
00
122
00
30
Depreciation Expense, Snow Equip.
517
160
00
Accumulated Depreciation, Snow Eq
124
160
00
30
Salaries Expense
511
190
00
Salaries Payable
212
190
00
Closing Entries
30
Plowing Fees
411
9,500
00
313
9,500
00
PROBLEM 5A-3 (CONTINUED)
PANJI’S PLOWING
GENERAL JOURNAL
PAGE 3
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Nov
30
Income Summary
313
4,210
00
Salaries Expense
511
1,990
00
Advertising Expense
512
00
Telephone Expense
513
00
Snow Supplies Expense
515
00
Rent Expense
514
00
Depreciation Expense, Office Eq.
516
00
Depreciation Expense, Snow Eq.
517
00
30
Income Summary
313
5,290
00
P. Maki, Capital
311
5,290
00
30
P. Maki, Capital
311
6,000
00
P. Maki, Withdrawals
312
6,000
00
CASH
ACCOUNT NO. 111
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Nov
1
GJ1
11,000
00
11,000
00
1
GJ1
1,500
00
9,500
00
6
GJ1
00
8,800
00
8
GJ1
7,000
00
00
GJ1
6,000
00
9,800
00
GJ1
1,800
00
8,000
00
GJ2
3,000
00
00
GJ2
00
00
PROBLEM 5A-3 (CONTINUED)
ACCOUNTS RECEIVABLE
ACCOUNT NO. 112
201X
Debit
Credit
Debit
Credit
GJ1
Date
Explanation
Post
Ref.
Balance
PREPAID RENT
ACCOUNT NO. 114
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
GJ1
30
GJ2
1,000
SNOW SUPPLIES
ACCOUNT NO. 115
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
GJ1
GJ2
OFFICE EQUIPMENT
ACCOUNT NO. 121
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
GJ1
6,000