Q.3-16E - Intermediate Accounting (Kieso)

Question

Question: E3-16 (L05) (Closing Entries for a Corporation) Presented below are selected account balances for Homer Winslow Co. as of December 31, 2017.

Inventory 12/31/17       \(60,000                   Cost of Goods Sold            \)225,700

Common Stock           \(75,000                    Selling Expenses                \)16,000

Retained Earnings      \(45,000                    Administrative Expenses   \)38,000

Dividends                    \(18,000                    Income Tax Expenses         \)30,000

Sales Returns and 

Allowances                  \(12,000   

Sales Discounts          \)15,000

Sales Revenue            $410,000

Instructions:

Prepare closing entries for Homer Winslow Co. on December 31,2017. (Omit explanations)

Step-by-Step Solution

Answer

Answer:

The amount of income summary expenses is $336,700.

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: Closing Entries for Homer Winslow co. on December 31, 2017

Date	Account Titles and Explanations	Debit	Credit
Dec 31, 2017	Sales Revenue	$410,000
	Income Summary		$410,000
Dec 31, 2017	Income Summary	$336,700
	Cost of Goods Sold		$225,700
	Sales returns and allowances		$12,000
	Sales Discounts		$15,000
	Selling Expenses		$16,000
	Administrative Expenses		$38,000
	Income Tax Expenses		$30,000
Dec 31, 2017	Income Summary	$73,300
	Retained Earnings		$73,300
Dec 31, 2017	Retained Earnings	$18,000
	Dividends		$18,000

Working notes:

Dec 31: Sales revenue = $410,000 (Given)

Dec 31: Income Summary for expenses

          = ($225,700 + $12,000 + $15,000 + $16,000 + $38,000 + $30,000)

          = $336,700

Dec 31: Retained Earnings = ($410,000 - $336,700) = $73,300

Dec 31: Dividends = $18,000 (Given)