Answer:
The Gorman Group
1. The Gorman Group
Income Statement
For the Year Ended October 31, 2019
Service Fees $421,010
Rent Revenue 4,450
Total Revenue $425,460
Salaries Expense $301,820
Depreciation Expense—Equipment 16,400
Rent Expense 13,700
Supplies Expense 9,710
Utilities Expense 8,780
Depreciation Expense—Buildings 5,850
Repairs Expense 4,840
Insurance Expense 2,650
Miscellaneous Expense 4,520 $368,270
Net Income $57,190
The Gorman Group
Statement of Owner's Equity
For the Year Ended October 31, 2019
Nicole Gorman, Capital $378,780
Net Income 57,190
Nicole Gorman, Drawing (22,200)
Owner's Equity, October 31, 2019 $413,770
2. Closing Journal Entries at October 31, 2019:
Debit Income Summary $368,270
Credit:
Salaries Expense $301,820
Depreciation Expense—Equipment 16,400
Rent Expense 13,700
Supplies Expense 9,710
Utilities Expense 8,780
Depreciation Expense—Buildings 5,850
Repairs Expense 4,840
Insurance Expense 2,650
Miscellaneous Expense 4,520
To close the expenses accounts to the income summary.
Debit:
Service Fees $421,010
Rent Revenue 4,450
Credit Income Summary $425,460
To close the revenue accounts to the income summary.
3. The amount of net income would have been $137,200.
Explanation:
a) Data and Calculations:
The Gorman Group
End-of-Period Spreadsheet
For the Year Ended October 31, 2019
Adjusted Trial Balance
Account Title Dr. Cr.
Cash $13,880
Accounts Receivable 30,210
Supplies 4,720
Prepaid Insurance 10,200
Land 89,000
Buildings 319,000
Accumulated Depreciation-Buildings $103,900
Equipment 230,000
Accumulated Depreciation-Equipment 135,300
Accounts Payable 29,520
Salaries Payable 2,930
Unearned Rent 1,330
Nicole Gorman, Capital 378,780
Nicole Gorman, Drawing 22,200
Service Fees 421,010
Rent Revenue 4,450
Salaries Expense 301,820
Depreciation Expense—Equipment 16,400
Rent Expense 13,700
Supplies Expense 9,710
Utilities Expense 8,780
Depreciation Expense—Buildings 5,850
Repairs Expense 4,840
Insurance Expense 2,650
Miscellaneous Expense 4,520
Totals 1,077,220 1,077,220
Amount of Nicole Gorman's Capital increased by $115,000:
Net income would have been $137,200 instead of $57,190.
Closing Nicole Gorman, Capital = $515,980
Less Drawings 22,200
Beginning capital 378,780 400,980
Increase in capital = $115,000