Wages Expense, Accumulated Depreciation, Fees Income. C. Retained earnings. Learn Accounting. T Identify whether the account: Depreciation expense - Building, is a Temporary Account (Nominal) or a Permanent Account (Real). Gain in-demand industry knowledge and hands-on practice that will help you stand out from the competition and become a world-class financial analyst. Which of the following could be an explanation for this transaction? The F. Mercury, Capital account has a credit balance of $42,000 before closing entries are made. Land purchased with cash was recorded with a debit to the Land account and a credit to Accounts Payable. Explanation b. Closing entries. The year-end financial statements of Rattlers Tax Services are provided below. Explanation Operating Expenses 5,100 | Dividends 500 | Which of the following statements regarding credit entries is true? Cash 1,300 | What is the entry to close the Income Summary account? Transfer revenues, expenses, and dividends to Retained earnings. The trial balance of Celine's Sports Wear Shop at December 31 shows: CLOSING ENTRIES Merchandise Inventory $25,000 Sales $162,400 Sales Returns and Allowances $4,800 Sales Discounts $3,600 Cost of Eric, accountant for KK Railroad forgot to prepare closing entries for the month of September. Merchandise Inventory b. Prepaid Insurance Journal Account Title from Chart of Accounts Tab. Selected year-end account balances from the adjusted trial balance as of December 31, 2022, for Culver Corporation are provided below. In preparing the first two closing entries, to which of the following columns of the worksheet does one refer? B) False. Should the Accumulated Depreciation account be closed at year-end? The following account balance in alphabetical order general ledger of Morgan waterproof and service of January 31. Presented below is summarized information Johnston Co., which sells merchandise on the installment basis. c. Cash payments. $7,400 The closing entry to move the balance of the dividends account to the retained earnings account would include a debit to retained earnings to decrease that account. b. interest expense on money borrowed to invest in municipal bonds. A credit to Prepaid Insurance for $400 What acronym might help us remember which accounts need to be closed at the end of the accounting period? If so, does the closing entry require a debit or a credit to the account? Consulting revenue | 1,300 The adjusting entry decreases unearned revenue, a liability, and increases revenue. The data from the temporary accounts (revenues, expenses, and dividends) must be moved into the retained earnings account. Income Summary is a permanent account only used for the closing process. Income Summary has a debit of $175,400 and a credit of $235,000. Prepare the general journal entry to record this transaction. Multiple Choice Liabilities increase and stockholders' equity decreases. True or false? Land, an asset, is increased with a debit, and cash, another asset, is decreased with a credit. Its expense accounts total $130,000, and its revenue accounts total $190,000. The Prepaid Rent account has an adjusted balance of $900 ($1,200 $300). OB. Rider Company is in the process of preparing its closing entries. Explanation A transaction has been recorded in the general journal of Manella Company as follows: Describe the kinds of identity crises Erikson experienced in childhood and adolescence. Also, discuss the difference between a temporary and a permanent acc What are the major sources of temporary cash? What should be the closing entry? Close the income summary account by debiting income summary and crediting retained earnings. depreciation expense, service revenue, and dividends Expenses are closed by debiting retained earnings and crediting each expense account All permanent accounts must be closed to retained earnings at the end of the Explanation Bad Debt Expense is a ____ (temporary/permanent) account. Which of the following accounts would be closed at the end of the accounting period with a debit? After making entries to close its revenue and expense accounts to Income Summary, Hancock Company has the following balances. Salaries Payable | 500 Gibbs has received cash for service to be provided in the future. A debit to Land and a credit to Cash b. Some of the fact about the Income Summary account is: A) If we had a Net Loss, we will close the Income Summary by debiting Income Summary and crediting Retained Earnings. Companies use closing entries to reset the balances of temporary accounts accounts that show balances over a single accounting period to zero. copyright 2003-2023 Homework.Study.com. Which of the following is a permanent account? The company would record an increase in cash (a debit) of $1,300, an increase in accounts receivable (a debit) of $1,200, and an increase in revenue (a credit) of $2,500. At year-end, a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use. A credit to retained earnings of $2,550 (to close the service revenue, interest expense, and operating expenses accounts) will increase retained earnings by $2,550. Common Stock 500,000 It is recorded as a debit to unearned revenue and a credit to the revenue account. Net income is overstated by $200. Multiple Choice Categorize the following account as temporary or permanent: Contributed Capital. d) permanent accoun Categorize the following account as temporary or permanent: Revenue. Income summary b. Comfort Furniture is organized as a corporation. If so, does the closing entry require a debit or a credit to the account? On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. 3 James Jaillet. Salary Expense b. If revenues are less than expenses, the company has a net loss, and retained earnings falls. A credit to Insurance Expense for $1,200. Multiple Choice a. Accruing salary expenses will increase Salaries Expense and increase Salaries Payable, a liability. A fellow student makes the following statement: "You can easily tell whether a company is using the cash or accrual basis of accounting. Explain theoretically how the distinction between temporary and permanent accounts relates to the closing process. Which of the following statements regarding closing journal entries is correct? Interest Expense |750 (All accounts have normal balances.) c. All permanent accounts. The two asset accounts listed on the trial balance are Cash and Accounts Receivable. A. The balances of these accounts areeventually used to construct the income statement at the end of the fiscal year. The debit to Cash increases this asset account and the credit to unearned revenue increases this liability account. a. That would be the journal entry recorded when cash is collected as an advance for work to be performed in the future. Which of the following group of accounts is not closed at the end of the period - the asset, liability, and capital accounts? If so, does the closing entry require a debit or a credit to the account? At December 31, Ortiz Corporation reports a net income of $405,900. Which of the following choices reflects the effect of closing entries on the company's financial statements? Post the closing entries to Income Summary and Retained Earnings. Cost of goods sold is: A) A revenue account. Assume that the entry closing total revenues of $3,190,000 and total expenses of $2,350,000 has been made for the year. a. prepaid rent b. sales revenue c. unearned revenue d. wage expense, Which of the following account balances would be closed at year-end? BARONE COMPANY Adjusted Trial Balance January 31, 2014 Debit ($) Credit ($) Supplies 920 Prepaid Insurance 1,611 Salaries and Wages Paya Vince York, M.D. This amount was carried forward into the beginning of 2017. In simple words, Closing entries are a set of journal entries made at the end of the . Prepare closing entries in journal format and post to the T Accounts. Which of the following accounts is increased with a credit? Create an account to browse all assetstoday. Total assets are understated by $200. Service Revenue 18,800 | Debits are equal to credits only after closing entries have been recorded. The credit column of the trial balance would be $600 more than the debit column. Service Revenue. Received cash in advance for work to be performed in future months Determine whether the following account has temporary balance: Retained Earnings. Retained earnings will decrease by $2,550. Explanation After the accounts have been adjusted on January 31, the following selected account balances were taken from the led On December 31, 2016, Ditka Inc. had Retained Earnings of $285,800 before its closing entries were prepared and posted. Identify whether the account: Fees earned, is a Temporary Account (Nominal) or a Permanent Account (Real). $2,900 B) The worksheet is a document used to summarize data to prepare financial statements . Assume a company has a net income that exceeds the owner's drawing for the current year. How do you close the expense accounts? Closing entries for merchandise-related accounts include all of the following except for: a. a credit to Sales Discounts. Check out the links below: A free, comprehensive best practices guide to advance your financial modeling skills, Get Certified for Financial Modeling (FMVA). D. both A and C are correct. On December 31, 2007, Bert's Farm Store had the following account balances in its accounting system. A) True. Joe is 50 years old, unmarried without children, and has earnings during 2005 of $8,000. The December 31, 2019, adjusted trial balance of Business Solutions (reflecting its transactions from October through December of 2019) follows. Both Asset Retirement Obligation and Sales Tax Payable. Provide an example of a permanently restricted resource. Credits increase the common stock account. O D. It is a process by which financial statements for a period are produced. a. Image transcription text. debit to Salaries Expense and credit to Cash. Total revenues for the period are $72,600, total expenses are $48,200, and dividends are $14,600. Depreciation Expense b. From the following list, identify the accounts that should be closed to Income Summary at the end of the fiscal year: a. The general ledger of the Karlin Company, a consulting company, at January 1, 2018, contained the following account balances: Account Title Debits ($) Credits ($) Cash 33,500 Accounts receivable 10 At January 1, Croc Industries reported owner's capital of $140,000. Which account will have a zero balance after a company has journalized and posted closing entries? Stevenson Company purchased supplies for $5,150 cash. Rent Expense c. Sales d. Merchandise Inventory. A. Debit the drawing account, credit the income summary account. Only after closing entries are posted will the trial balance reflect the same retained earnings account balance as the balance sheet. Operating Expenses 15,000 Dividends 4,500 The Retained Earnings account has a credit balance of $37,000 before closing entries are made. Income Summary is a permanent account only used for the closing process. TThe monthly insurance cost is $200 ($1,200 6 months). If so, does the closing entry require a debit or a credit to the account? Determine whether the following account has temporary balance: Cash. How would the related adjusting entry be recorded in the company's T-accounts? Identify whether the account: Supplies expense, is a Temporary Account (Nominal) or a Permanent Account (Real). c. Dividends. Total liabilities are overstated by $200.