Question

The income statement for the Bonita Pines Golf Club Inc. for the month ended July 31 shows Service Revenue $16,000, Salaries and Wages Expense $8,400, Maintenance and Repairs Expense $2,500, and Income Tax Expense $1,000. The statement of retained earnings shows an opening balance for Retained Earnings of $20,000 and Dividends $1,300.
Required:
a. Prepare closing journal entries.
b. What is the ending balance in Retained Earnings?

Answer 1

Answer:

a. 31-Jul

Dr Service Revenue16,000

Cr Income Summary16,000

31-Jul

Dr Income Summary11,900

Cr Salaries & Wages Expense8,400

Cr Maintenance & Repairs Expense2,500

Cr Income Tax Expense1,000

31-Jul

Dr Income Summary4,100

Cr Retained Earnings4,100

31-Jul

Dr Retained Earnings1,300

Cr Dividends1,300

b. $22,800

Explanation:

a. Preparation of closing journal entries.

31-Jul

Dr Service Revenue16,000

Cr Income Summary16,000

(Being To close revenue account)

31-Jul

Dr Income Summary11,900

(8,400+2,500+1,000)

Cr Salaries & Wages Expense8,400

Cr Maintenance & Repairs Expense2,500

Cr Income Tax Expense1,000

(Being To close expense accounts)

31-Jul

Dr Income Summary4,100

Cr Retained Earnings4,100

(16,000-11,900)

(Being To close net income to Retained earning)

31-Jul

Dr Retained Earnings1,300

Cr Dividends1,300

(Being To close dividends to Retained earning )

b. Calculation fo What is the ending balance in Retained Earnings

Retained Earnings ending balance=$20,000−$1,300+$16,000−$8,400−$2,500−$1,000

Retained Earnings ending balance=$22,800

Therefore Retained Earnings ending balance will be $22,800