CHAPTER 4 — PRACTICE WORKSHEET

Closing Entries · work it on paper, then check yourself

Try every exercise on paper BEFORE you check the answers. The attempt is where it sticks.

The exercises

1. Exercise 1 — Temporary or permanent?

Decide whether each account is temporary (closed) or permanent (not closed).

a
Service Revenue is:
a) Temporary (closed) b) Permanent (not closed)
b
Owner's Capital is:
a) Temporary (closed) b) Permanent (not closed)
c
Owner's Drawings is:
a) Temporary (closed) b) Permanent (not closed)
d
Accumulated Depreciation is:
a) Temporary (closed) b) Permanent (not closed)
e
Rent Expense is:
a) Temporary (closed) b) Permanent (not closed)

2. Exercise 2 — Close the revenue

Brookfield Services has one revenue account: Service Revenue with a $48,000 credit balance.

a
Journalize the entry to close Service Revenue.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense

3. Exercise 3 — Close the expenses

Brookfield's expense accounts: Salaries and Wages Expense $22,000; Rent Expense $6,000; Supplies Expense $3,500; Depreciation Expense $4,500; Utilities Expense $2,000.

a
Total expenses to close
b
Journalize the entry to close all five expenses (one debit to Income Summary, five credits).
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense

4. Exercise 4 — Close Income Summary (net income)

After closing revenues and expenses, Brookfield's Income Summary has a $48,000 credit and a $38,000 debit.

a
Income Summary balance (the net income)
b
Journalize the entry to close Income Summary to Owner's Capital.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense

5. Exercise 5 — Close the drawings

Brookfield's owner withdrew $5,000 during the period (Owner's Drawings $5,000 debit balance).

a
Journalize the entry to close Owner's Drawings.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense

6. Exercise 6 — Closing with a net loss

Cedar Lane Co. had revenues of $30,000 and expenses of $34,000. Its Income Summary (after closing revenues and expenses) holds the result.

a
The size of the net loss
b
Journalize the entry to close Income Summary to Owner's Capital.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense

7. Exercise 7 — Ending capital after closing

Brookfield began the period with Owner's Capital of $40,000, earned $10,000 of net income, and the owner withdrew $5,000.

a
Ending Owner's Capital

8. Exercise 8 — The post-closing trial balance

After Brookfield's closing entries, the permanent accounts are: Cash $20,000; Accounts Receivable $7,000; Supplies $1,500; Prepaid Insurance $3,000; Equipment $45,000; Accumulated Depreciation $9,000; Accounts Payable $6,500; Salaries and Wages Payable $1,000; Unearned Revenue $3,000; Notes Payable $12,000; Owner's Capital $45,000.

a
Which of these would ALSO appear on the post-closing trial balance?
a) Service Revenue b) None of these — all temporary accounts are now zero c) Depreciation Expense d) Income Summary
b
Total of the DEBIT column
c
Total of the CREDIT column

9. Exercise 9 — Order the accounting cycle

Put the period-end steps of the accounting cycle in the right order.

a
Which comes FIRST?
a) Closing entries b) Post-closing trial balance c) Adjusting entries d) Financial statements
b
Which comes right BEFORE closing entries?
a) Post the transactions b) Prepare the post-closing trial balance c) Analyze transactions d) Prepare the financial statements
c
Which is the LAST step?
a) Post-closing trial balance b) Closing entries c) Adjusted trial balance d) Financial statements

10. Exercise 10 — Correcting entries

Fix each posted error with a correcting entry.

a
A $300 cash collection for services performed this period was recorded as Debit Cash / Credit Accounts Receivable, but it should have credited Service Revenue. Record the correcting entry.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense
b
A $250 utility bill paid in cash was recorded as Debit Rent Expense / Credit Cash. Record the correcting entry.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense

11. Exercise 11 — Classify and total the balance sheet

Use Brookfield's permanent balances: Cash $20,000; Accounts Receivable $7,000; Supplies $1,500; Prepaid Insurance $3,000; Equipment $45,000; Accumulated Depreciation $9,000; Accounts Payable $6,500; Salaries and Wages Payable $1,000; Unearned Revenue $3,000; Notes Payable (long-term) $12,000; Owner's Capital $45,000.

a
Prepaid Insurance is reported under:
a) Property, plant & equipment b) Current assets c) Current liabilities d) Owner's equity
b
Total current assets
c
Property, plant & equipment (Equipment net of accumulated depreciation)
d
Total assets
e
Total current liabilities

12. Exercise 12 — Work backward

Reconstruct the missing figures from the closing data of two firms.

a
Maple Co.'s Owner's Capital rose from $40,000 to $45,000 after closing, and drawings were $5,000. What was net income?
b
Birch Co.'s Income Summary was debited $52,000 (expenses) and credited $61,000 (revenues) before being closed. What net income closes to capital?
c
Elm Co. had beginning capital $30,000, net income $12,000, and ending capital $34,000. How much did the owner withdraw?

13. Exercise 13 — Complete the worksheet

Meadowlark Co.'s adjusted trial balance: Cash $8,000; Accounts Receivable $3,000; Supplies $500; Equipment $20,000; Accumulated Depreciation $4,000; Accounts Payable $2,500; Owner's Capital $21,000; Owner's Drawings $2,000; Service Revenue $24,000; Salaries and Wages Expense $12,000; Rent Expense $3,000; Depreciation Expense $2,000; Insurance Expense $1,000.

a
Income Statement column — total of the expenses (debit)
b
Income Statement column — revenue (credit)
c
Net income (revenue - expenses)
d
On the worksheet, that $6,000 net income is written into:
a) The Income Statement debit column and the Balance Sheet credit column b) The Income Statement credit column and the Balance Sheet debit column c) Only the Income Statement debit column d) Only the Balance Sheet debit column
e
Balance Sheet column — total of the debits (assets + drawings)

14. Exercise 14 — Extend to the right column

On the worksheet, decide whether each account extends to the Income Statement or the Balance Sheet columns.

a
Service Revenue extends to:
a) Income Statement b) Balance Sheet
b
Accumulated Depreciation extends to:
a) Balance Sheet b) Income Statement
c
Owner's Drawings extends to:
a) Income Statement b) Balance Sheet
d
Depreciation Expense extends to:
a) Income Statement b) Balance Sheet
e
Unearned Revenue extends to:
a) Balance Sheet b) Income Statement

15. Exercise 15 — Owner's equity statement

Meadowlark Co. began the year with Owner's Capital of $21,000, earned net income of $6,000, and the owner withdrew $2,000 (no new investments).

a
Ending Owner's Capital

16. Exercise 16 — Classify the balance-sheet accounts

Sort each account into the right classified-balance-sheet section.

a
Patents are:
a) Intangible assets b) Current assets c) Property, plant & equipment d) Current liabilities
b
Land held for future use is:
a) Property, plant & equipment b) Long-term investments c) Current assets d) Intangible assets
c
A note payable due in 3 years is:
a) Current liability b) Current asset c) Long-term liability d) Owner's equity
d
Prepaid Insurance is:
a) Long-term investments b) Property, plant & equipment c) Intangible assets d) Current assets
e
Equipment (in use) is:
a) Property, plant & equipment b) Current assets c) Long-term investments d) Intangible assets

17. Exercise 17 — More correcting entries

Fix each posted error for Harlow Co.

a
A $1,000 cash collection from a customer ON ACCOUNT was recorded as Debit Cash / Credit Service Revenue. It should have reduced Accounts Receivable, not recorded new revenue. Record the correcting entry.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense
b
A $760 purchase of equipment on account was mistakenly recorded as $670 (Debit Equipment 670 / Credit Accounts Payable 670). Record the correcting entry for the difference.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense

18. Exercise 18 — Reversing entries (appendix)

Kestrel Co. accrued $1,800 of salaries at December 31 and uses reversing entries.

a
First, record the December 31 adjusting entry for the accrued salaries.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense
b
Now record the January 1 reversing entry.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense

19. Exercise 19 — Full cycle: worksheet to closing

Cardinal Cleaning Co.'s adjusted trial balance at year-end: Cash $9,000; Accounts Receivable $4,000; Supplies $800; Prepaid Insurance $1,200; Equipment $25,000; Accumulated Depreciation $5,000; Accounts Payable $3,500; Salaries and Wages Payable $700; Unearned Revenue $1,800; Notes Payable (long-term) $8,000; Owner's Capital $18,000; Owner's Drawings $3,000; Service Revenue $42,000; Salaries and Wages Expense $20,000; Rent Expense $5,000; Supplies Expense $2,400; Insurance Expense $1,200; Depreciation Expense $5,000; Utilities Expense $2,400. Work it all the way through.

a
Income statement — total expenses
b
Income statement — net income
c
Owner's equity statement — ending capital
d
Classified balance sheet — total current assets
e
Classified balance sheet — property, plant & equipment (net)
f
Classified balance sheet — total assets
g
Closing entry 1 — close the revenue.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense
h
Closing entry 2 — close the six expenses.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense
i
Closing entry 3 — close Income Summary to capital.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense
j
Closing entry 4 — close the drawings.
Accounts available: Cash · Accounts Receivable · Supplies · Prepaid Insurance · Equipment · Accumulated Depreciation · Accounts Payable · Salaries and Wages Payable · Unearned Revenue · Notes Payable · Owner's Capital · Owner's Drawings · Income Summary · Service Revenue · Sales Revenue · Salaries and Wages Expense · Rent Expense · Supplies Expense · Insurance Expense · Depreciation Expense · Utilities Expense · Interest Expense
k
Post-closing trial balance — total of each column (permanent accounts only)

Answers

Part of the free Accounting 1 course — Chapter 4: Closing Entries

ANSWERS — do not read these until you have finished

1. Exercise 1 — Temporary or permanent?

a
Temporary (closed)
A revenue — an income-statement account, so temporary.
b
Permanent (not closed)
A balance-sheet equity account — permanent.
c
Temporary (closed)
Drawings is temporary — it closes to capital each period.
d
Permanent (not closed)
A contra-asset on the balance sheet — permanent, not closed.
e
Temporary (closed)
An expense — temporary.

Solution: Temporary: Service Revenue, Owner's Drawings, Rent Expense. Permanent: Owner's Capital, Accumulated Depreciation.

2. Exercise 2 — Close the revenue

a
Account Debit Credit
Service Revenue 48,000
Income Summary 48,000
Debit Service Revenue 48,000 to clear its credit balance; credit Income Summary 48,000.

Account	Debit	Credit
Service Revenue	48,000
Income Summary		48,000

Solution: Debit Service Revenue 48,000; Credit Income Summary 48,000.

3. Exercise 3 — Close the expenses

a
38,000
22,000 + 6,000 + 3,500 + 4,500 + 2,000 = 38,000.
b
Account Debit Credit
Income Summary 38,000
Salaries and Wages Expense 22,000
Rent Expense 6,000
Supplies Expense 3,500
Depreciation Expense 4,500
Utilities Expense 2,000
Debit Income Summary 38,000; credit each expense for its balance. Debits 38,000 = credits 38,000.

Account	Debit	Credit
Income Summary	38,000
Salaries and Wages Expense		22,000
Rent Expense		6,000
Supplies Expense		3,500
Depreciation Expense		4,500
Utilities Expense		2,000

Solution: Debit Income Summary 38,000; Credit Salaries 22,000, Rent 6,000, Supplies 3,500, Depreciation 4,500, Utilities 2,000.

4. Exercise 4 — Close Income Summary (net income)

a
10,000
48,000 − 38,000 = 10,000 credit — a net income.
b
Account Debit Credit
Income Summary 10,000
Owner's Capital 10,000
With a net income, debit Income Summary 10,000; credit Owner's Capital 10,000.

Account	Debit	Credit
Income Summary	10,000
Owner's Capital		10,000

Solution: Net income 10,000. Debit Income Summary 10,000; Credit Owner's Capital 10,000.

5. Exercise 5 — Close the drawings

a
Account Debit Credit
Owner's Capital 5,000
Owner's Drawings 5,000
Debit Owner's Capital 5,000; credit Owner's Drawings 5,000. Drawings closes directly to capital.

Account	Debit	Credit
Owner's Capital	5,000
Owner's Drawings		5,000

Solution: Debit Owner's Capital 5,000; Credit Owner's Drawings 5,000.

6. Exercise 6 — Closing with a net loss

a
4,000
34,000 − 30,000 = 4,000. Income Summary has a 4,000 DEBIT balance.
b
Account Debit Credit
Owner's Capital 4,000
Income Summary 4,000
A net loss: debit Owner's Capital 4,000; credit Income Summary 4,000 — the loss reduces capital.

Account	Debit	Credit
Owner's Capital	4,000
Income Summary		4,000

Solution: Net loss 4,000. Debit Owner's Capital 4,000; Credit Income Summary 4,000.

7. Exercise 7 — Ending capital after closing

a
45,000
Beginning 40,000 + net income 10,000 − drawings 5,000 = 45,000.

Solution: 40,000 + 10,000 − 5,000 = $45,000.

8. Exercise 8 — The post-closing trial balance

a
None of these — all temporary accounts are now zero
Revenues, expenses, and Income Summary are all temporary and were closed to zero.
b
76,500
Cash 20,000 + A/R 7,000 + Supplies 1,500 + Prepaid Insurance 3,000 + Equipment 45,000 = 76,500.
c
76,500
Accum. Dep. 9,000 + A/P 6,500 + Salaries Payable 1,000 + Unearned 3,000 + Notes 12,000 + Capital 45,000 = 76,500.

Solution: Only permanent accounts appear. Debit column 76,500 = credit column 76,500.

9. Exercise 9 — Order the accounting cycle

a
Adjusting entries
Adjusting entries come before the adjusted trial balance and the statements.
b
Prepare the financial statements
Statements are prepared from the adjusted trial balance, then the books are closed.
c
Post-closing trial balance
The post-closing trial balance is the final step, proving the books balance for the next period.

Solution: …adjusting entries → adjusted trial balance → financial statements → closing entries → post-closing trial balance.

10. Exercise 10 — Correcting entries

a
Account Debit Credit
Accounts Receivable 300
Service Revenue 300
Cash was right. Undo the wrong credit to A/R (debit A/R 300) and record the correct credit to Service Revenue 300.
b
Account Debit Credit
Utilities Expense 250
Rent Expense 250
Cash was right. Move the 250 out of Rent Expense (credit it) and into Utilities Expense (debit it).

Account	Debit	Credit
Accounts Receivable	300
Service Revenue		300

Account	Debit	Credit
Utilities Expense	250
Rent Expense		250

Solution: 1) Debit Accounts Receivable 300; Credit Service Revenue 300. 2) Debit Utilities Expense 250; Credit Rent Expense 250.

11. Exercise 11 — Classify and total the balance sheet

a
Current assets
It will be used up within a year — a current asset.
b
31,500
Cash 20,000 + A/R 7,000 + Supplies 1,500 + Prepaid Insurance 3,000 = 31,500.
c
36,000
45,000 − 9,000 = 36,000.
d
67,500
31,500 + 36,000 = 67,500.
e
10,500
A/P 6,500 + Salaries Payable 1,000 + Unearned Revenue 3,000 = 10,500 (Notes Payable is long-term).

Solution: Current assets 31,500; PP&E net 36,000; total assets 67,500. Current liabilities 10,500; long-term 12,000; equity 45,000 → 67,500.

12. Exercise 12 — Work backward

a
10,000
45,000 = 40,000 + net income − 5,000, so net income = 10,000.
b
9,000
61,000 − 52,000 = 9,000 credit balance = net income.
c
8,000
34,000 = 30,000 + 12,000 − drawings, so drawings = 8,000.

Solution: Maple net income 10,000; Birch net income 9,000; Elm drawings 8,000.

13. Exercise 13 — Complete the worksheet

a
18,000
12,000 + 3,000 + 2,000 + 1,000 = 18,000.
b
24,000
Service Revenue 24,000 is the only revenue.
c
6,000
24,000 - 18,000 = 6,000.
d
The Income Statement debit column and the Balance Sheet credit column
Net income balances the Income Statement columns on the debit side and increases equity on the Balance Sheet credit side.
e
33,500
8,000 + 3,000 + 500 + 20,000 + 2,000 = 33,500.

Solution: Expenses 18,000; revenue 24,000; net income 6,000 (IS debit / BS credit). Balance Sheet debit column 33,500 = credit 27,500 + net income 6,000.

14. Exercise 14 — Extend to the right column

a
Income Statement
A revenue — income statement.
b
Balance Sheet
A contra-asset — balance sheet.
c
Balance Sheet
Drawings is a balance-sheet (equity) item on the worksheet, even though it is temporary.
d
Income Statement
An expense — income statement.
e
Balance Sheet
A liability — balance sheet.

Solution: Income Statement: Service Revenue, Depreciation Expense. Balance Sheet: Accumulated Depreciation, Owner's Drawings, Unearned Revenue.

15. Exercise 15 — Owner's equity statement

a
25,000
21,000 + 6,000 - 2,000 = 25,000.

Solution: Beginning 21,000 + net income 6,000 - drawings 2,000 = ending capital 25,000.

16. Exercise 16 — Classify the balance-sheet accounts

a
Intangible assets
Patents have no physical form — intangible assets.
b
Long-term investments
Not used in operations — a long-term investment.
c
Long-term liability
Due beyond one year — long-term liability.
d
Current assets
Used up within a year — current asset.
e
Property, plant & equipment
A long-lived operating asset — property, plant & equipment.

Solution: Patents -> intangible; land held for future use -> long-term investments; note due in 3 years -> long-term liability; Prepaid Insurance -> current asset; Equipment -> PP&E.

17. Exercise 17 — More correcting entries

a
Account Debit Credit
Service Revenue 1,000
Accounts Receivable 1,000
Cash was right. Remove the wrong revenue (debit Service Revenue 1,000) and reduce the receivable (credit Accounts Receivable 1,000).
b
Account Debit Credit
Equipment 90
Accounts Payable 90
Only the amount is wrong: 760 - 670 = 90. Debit Equipment 90; credit Accounts Payable 90.

Account	Debit	Credit
Service Revenue	1,000
Accounts Receivable		1,000

Account	Debit	Credit
Equipment	90
Accounts Payable		90

Solution: 1) Debit Service Revenue 1,000; Credit Accounts Receivable 1,000. 2) Debit Equipment 90; Credit Accounts Payable 90.

18. Exercise 18 — Reversing entries (appendix)

a
Account Debit Credit
Salaries and Wages Expense 1,800
Salaries and Wages Payable 1,800
Accrue the expense: debit Salaries and Wages Expense 1,800; credit Salaries and Wages Payable 1,800.
b
Account Debit Credit
Salaries and Wages Payable 1,800
Salaries and Wages Expense 1,800
Reverse it: debit Salaries and Wages Payable 1,800; credit Salaries and Wages Expense 1,800. The next payroll can then be debited to the expense in full.

Account	Debit	Credit
Salaries and Wages Expense	1,800
Salaries and Wages Payable		1,800

Account	Debit	Credit
Salaries and Wages Payable	1,800
Salaries and Wages Expense		1,800

Solution: Dec 31: Dr Salaries and Wages Expense 1,800 / Cr Salaries and Wages Payable 1,800. Jan 1 reversing: Dr Salaries and Wages Payable 1,800 / Cr Salaries and Wages Expense 1,800.

19. Exercise 19 — Full cycle: worksheet to closing

a
36,000
20,000 + 5,000 + 2,400 + 1,200 + 5,000 + 2,400 = 36,000.
b
6,000
Service Revenue 42,000 - expenses 36,000 = 6,000.
c
21,000
Beginning 18,000 + net income 6,000 - drawings 3,000 = 21,000.
d
15,000
Cash 9,000 + A/R 4,000 + Supplies 800 + Prepaid Insurance 1,200 = 15,000.
e
20,000
Equipment 25,000 - accumulated depreciation 5,000 = 20,000.
f
35,000
15,000 + 20,000 = 35,000 (equals total liabilities 14,000 + ending capital 21,000).
g
Account Debit Credit
Service Revenue 42,000
Income Summary 42,000
Debit Service Revenue 42,000; credit Income Summary 42,000.
h
Account Debit Credit
Income Summary 36,000
Salaries and Wages Expense 20,000
Rent Expense 5,000
Supplies Expense 2,400
Insurance Expense 1,200
Depreciation Expense 5,000
Utilities Expense 2,400
Debit Income Summary 36,000; credit each expense. Debits 36,000 = credits 36,000.
i
Account Debit Credit
Income Summary 6,000
Owner's Capital 6,000
Net income: debit Income Summary 6,000; credit Owner's Capital 6,000.
j
Account Debit Credit
Owner's Capital 3,000
Owner's Drawings 3,000
Debit Owner's Capital 3,000; credit Owner's Drawings 3,000.
k
40,000
Debits: Cash 9,000 + A/R 4,000 + Supplies 800 + Prepaid Insurance 1,200 + Equipment 25,000 = 40,000. Credits: Accum. Dep. 5,000 + A/P 3,500 + Salaries Payable 700 + Unearned 1,800 + Notes 8,000 + ending Capital 21,000 = 40,000.

Account	Debit	Credit
Service Revenue	42,000
Income Summary		42,000

Account	Debit	Credit
Income Summary	36,000
Salaries and Wages Expense		20,000
Rent Expense		5,000
Supplies Expense		2,400
Insurance Expense		1,200
Depreciation Expense		5,000
Utilities Expense		2,400

Account	Debit	Credit
Income Summary	6,000
Owner's Capital		6,000

Account	Debit	Credit
Owner's Capital	3,000
Owner's Drawings		3,000

Solution: Expenses 36,000; net income 6,000; ending capital 21,000; total assets 35,000. Closing entries as above. Post-closing trial balance totals 40,000 each column.

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