Q14E - Intermediate Accounting (Kieso)

Question

(LO5) (Closing Entries) Presented below is information related to Gonzales Corporation for the month of January 2017.

Cost of Goods sold        \( 208,000        Salaries and wages expenses   \)61,000

Delivery expenses          \( 7,000            Sales discounts                          \) 8,000

Insurance expenses       \( 12,000          Sales returns and allowances   \)13,000

Rent expenses                \( 20,000          Sales revenue                             \)350,000

Instructions:

Prepare the necessary closing entries.

Step-by-Step Solution

Answer

The total amount of income summary expenses is $329,000.

Step 1: Meaning of Journal entry

The journal entry is the act of keeping a record of any transactions and events either economic or non-economic. The recording of journal entry, includes Serial number or transaction number, Date, Accounts titles and explanations, debit and credit, and narrations.

Step 2: Journal Entries

The necessary closing entries for the above information are as follows:

Closing Entries
No.	Date	Accounts Titles and Explanations	Debit	Credit
1	Jan 31	Sales Revenue	$ 350,000
		Income Summary		$ 350,000
2	Jan 31	Income Summary	$ 329,000
		Cost of goods sold		$ 208,000
		Delivery Expenses		$ 7,000
		Insurance Expenses		$ 12,000
		Rent Expenses		$ 20,000
		Salaries and wages expenses		$ 61,000
		Sales discounts		$ 8,000
		Sales returns and allowances		$ 13,000
3	Jan 31	Income Summary	$ 21,000
		Retained Earnings		$ 21,000

Working notes:

1) Sales Revenue = $350,000 (Given)

2) Income Summary = ($208,000+$7,000+$12,000+$20,000+$61,000+$8,000+$13,000)

                                    = $329,000

3) Retained earnings = ($350,000 - $329,000) = $21,000