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 $ 18,000 126 Supplies 11,800 128 Prepaid insurance 2,000 167 Equipment 23,000 168 Accumulated depreciation—Equipment $ 6,500 307 Common stock 8,443 318 Retained earnings 37,600 319 Dividends 6,000 404 Services revenue 37,300 612 Depreciation expense—Equipment 2,000 622 Salaries expense 21,746 637 Insurance expense 1,567 640 Rent expense 2,499 652 Supplies expense 1,231 Totals $ 89,843 $ 89,843 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: The Retained Earnings account balance was $37,600 on December 31 of the prior year.

Answer 1

Answer:

Cruz Company

1. Closing Journal Entries:

Debit Income Summary   $29,043

Credit:

612 Depreciation expense

  —Equipment                                  $2,000

622 Salaries expense                       21,746

637 Insurance expense                      1,567

640 Rent expense                             2,499

652 Supplies expense                        1,231

To close expenses to Income Summary.

Debit 404 Services revenue $37,300

Credit Income Summary                    $37,300

To close Service Revenue to Income Summary.

Debit Statement of Retained Earnings $6,000

Credit Dividends                                                  $6,000

To close Dividends to Statement of Retained Earnings.

Debit Income Summary $8,157

Credit Statement of Retained Earnings $8,157

To close the Income Summary to the Statement of Retained Earnings

2. Cruz Company

Post-Closing Trial Balance as of December 31:

No.  Account Title               Debit           Credit

101  Cash                          $ 18,000

126 Supplies                        11,800

128 Prepaid insurance        2,000

167 Equipment                  23,000

168 Accumulated depreciation

 —Equipment                                     $ 6,500

307 Common stock                               8,443

318 Retained earnings                        39,857

Totals                          $ 54,800      $ 54,800

Explanation:

a) Data and Calculations:

Cruz Company

Trial Balance as of December 31:

No.  Account Title               Debit           Credit

101  Cash                          $ 18,000

126 Supplies                        11,800

128 Prepaid insurance        2,000

167 Equipment                  23,000

168 Accumulated depreciation

 —Equipment                                     $ 6,500

307 Common stock                               8,443

318 Retained earnings                        37,600

319 Dividends                    6,000

404 Services revenue                         37,300

612 Depreciation expense

  —Equipment                  2,000

622 Salaries expense     21,746

637 Insurance expense    1,567

640 Rent expense           2,499

652 Supplies expense      1,231

Totals                          $ 89,843       $ 89,843

b) Income Summary

Service Revenue $37,300

less Expenses       29,043

Net Income           $8,257

c) Statement of Retained Earnings

Retained Earnings, beginning $37,600

Add net income                            8,257

Less Dividends                            6,000

Retained Earnings, ending     $39,857