Bava Consulting has the following account balances at December 31, the end of its fiscal year.Service Fees Earned $85,000Rent Expense $22,000Salaries Expense 50,000Supplies Expense 4,000Depreciation Expense 18,000Retained Earnings 70,000Set up T-accounts for each account and record the above amounts in each account. Then, post the closing entries to the T-accounts. After theseentries are posted, what is the balance of the Retained Earnings account?

Question
Asked Sep 21, 2019

Bava Consulting has the following account balances at December 31, the end of its fiscal year.


Service Fees Earned $85,000
Rent Expense $22,000
Salaries Expense 50,000
Supplies Expense 4,000
Depreciation Expense 18,000
Retained Earnings 70,000


Set up T-accounts for each account and record the above amounts in each account. Then, post the closing entries to the T-accounts. After these
entries are posted, what is the balance of the Retained Earnings account?

check_circleExpert Solution
Step 1

When closing entries are prepared, the balances of T-accounts of revenue and expenditure is transferred to Income summary, the balances of Income summary account is transferred to retained earnings which is a permanent account.

Step 2
Service Fees Earned
Dr
Cr
Dr
Rent expenses
Cr
Date
Date
Accounts
Date
Accounts
Accounts
Date
Accounts
85,000 31.Dec
22,000
31-Dec Income summary
31.Dec
Income summary
Balance
85,000
31.Dec
Balance
22,000
Supplies Expense
Date
Salaries expenses
Cr
Dr
Cr
Dr
S
Date
Accounts
Date
Accounts
Date
Accounts
Accounts
50,000
4,000
Balance
31-Dec Income summary
Balance
31.Dec
50,000
31.Dec
31-Dec Income summary
4,000
Retained Earnings
Dr
Depreciation
Cr
Dr
Cr
$
Date
S
Date
Date
Date
Accounts
Accounts
Accounts
Accounts
9,000
31-Dec Balance
Balance
31-Dec Income summary
18,000
Income Summary
Balance c/f
31.Dec
18,000
70,000
61,000
70,000
70,000
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Service Fees Earned Dr Cr Dr Rent expenses Cr Date Date Accounts Date Accounts Accounts Date Accounts 85,000 31.Dec 22,000 31-Dec Income summary 31.Dec Income summary Balance 85,000 31.Dec Balance 22,000 Supplies Expense Date Salaries expenses Cr Dr Cr Dr S Date Accounts Date Accounts Date Accounts Accounts 50,000 4,000 Balance 31-Dec Income summary Balance 31.Dec 50,000 31.Dec 31-Dec Income summary 4,000 Retained Earnings Dr Depreciation Cr Dr Cr $ Date S Date Date Date Accounts Accounts Accounts Accounts 9,000 31-Dec Balance Balance 31-Dec Income summary 18,000 Income Summary Balance c/f 31.Dec 18,000 70,000 61,000 70,000 70,000

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