Question

The following adjusted trial balance contains the accounts and year-end balances of Cruz Company as of December 31. No. Account Title Debit Credit 101 Cash $ 19,000 126 Supplies 13,000 128 Prepaid insurance 3,000 167 Equipment 24,000 168 Accumulated depreciation—Equipment $ 7,500 301 A. Cruz, Capital 47,600 302 A. Cruz, Withdrawals 7,000 404 Services revenue 44,000 612 Depreciation expense—Equipment 3,000 622 Salaries expense 22,000 637 Insurance expense 2,500 640 Rent expense 3,400 652 Supplies expense 2,200 Totals $ 99,100 $ 99,100 1. Prepare the December 31, closing entries for Cruz Company. Assume the account number for Income Summary is 901. 2. Prepare the December 31, post-closing trial balance for Cruz Company. Note: A. Cruz, Capital was $47,600 on December 31 of the prior year.

Answer 1

Answer:

Services revenue 44,000 debit

       Income Summary        44,000 credit

--to close revenues accounts--

Income Summary       33,100 debit

Depreciation expense—Equipment 3,000 credit

Salaries expense                             22,000 credit

Insurance expense                            2,500 credit

Rent expense                                     3,400 credit

Supplies expense                              2,200 credit

--to close expenses account--

Income Summary           7,000 debit

     A. Cruz, Withdrawals            7,000 credit

--to close withdrawals account--

Income summary     3,900 debit

      A. Cruz, Capital Account      3,900 credit

--to close Income Summary against Cruz, capital account--

 

Cash                     19,000

Supplies                13,000

Prepaid insurance 3,000

Equipment           24,000

Accumulated depreciation—Equipment 7,500

A. Cruz, Capital                                        51,500

Totals                   59,000                         59,000

Explanation:

To close the accounting period we will use income summary to write off expenses, revenues and withdrawals account. Then, the balance of this account will be transfer into Cruz Capital Account

income summary balance: 44,000 -33,100 - 7,000 = 44,000 - 40,100 = 3,900

Then we post the trial balance considering assets has debit balance while liabilities and equity credit.

We check if everything is okay and it does. Debit = Credit