Question

On December 31, 2016, Ditka Inc. had Retained Earnings of $285,800 before its closing entries were prepared and posted. During 2016, the company had service revenue of $186,100 and interest revenue of $90,300. The company used supplies in the amount of $96,900, advertising expenses were $18,200, salaries and wages totaled $21,000, and income tax expense was calculated as $17,300. During the year, the company declared and paid dividends of $7,800. Prepare the closing entries dated December 31, 2016.

Answer 1

Answer:

Closing Entries Dated 31, 2016

                                            Dr.             Cr.

Closing Income Accounts

Service revenue            $186,100

Interest revenue            $90,300

Income Summary                             $276,400

Closing Expense Accounts

Income Summary           $153,400

Supplies Expense                            $96,900

Advertising expenses                      $18,200

Salaries and wages                         $21,000

Income tax expense                        $17,300

Closing Income Summary Account

Income Summary           $123,000

Retained Earning                             $123,000

Closing Dividend Account

Retained Earning           $7,800

Dividend                                           $7,800

Explanation:

All the Income and Expenses accounts are closed to Income summary account. The net balance of income summary account is transferred to retained earning account. The dividend balance is also transferred to retained earning account to close it. Ultimately all the balances are netted off in retained earning account.