Mastery Problem: The Accounting Cycle. Chandler, Inc. Chandler, Inc. is owned by Roscoe Chandler and provides appraisal services to individuals and companies wishing to purchase and sell fine art. Chandler, Inc. began business on January 1, 2017, and is just completing its first year of business. Roscoe asks for your help in completing the accounting cycle for the company by assisting with the closing process.

Question

Mastery Problem: The Accounting Cycle.

Chandler, Inc.

Chandler, Inc. is owned by Roscoe Chandler and provides appraisal services to individuals and companies wishing to purchase and sell fine art. Chandler, Inc. began business on January 1, 2017, and is just completing its first year of business. Roscoe asks for your help in completing the accounting cycle for the company by assisting with the closing process.

Adjusted Trial Balance

Before the closing entries are journalized, you begin with an adjusted trial balance. The closing entries are essentially the link from the adjusted trial balance to the post-closing trial balance.

Chandler, Inc.
Adjusted Trial Balance
December 31, 2017
Account Title Debit Balances Credit Balances
Cash 93,000  
Accounts Receivable 29,000  
Prepaid Insurance 16,000  
Office Equipment 60,000  
Accumulated Depreciation-Office Equipment   40,000
Accounts Payable   6,000
Salaries Payable   8,000
Income Taxes Payable   4,000
Common Stock   2,000
Retained Earnings   25,000
Dividends 5,000  
Fees Earned   185,600
Rent Revenue   92,000
Interest Revenue   17,200
Salaries Expense 71,000  
Selling Expense 25,600  
Income Taxes Expense 15,000  
Insurance Expense 17,000  
Depreciation Expense 47,200  
Miscellaneous Expense 1,000  
  379,800 379,800

Roscoe's Journal

Roscoe has attempted to journalize the closing entries for Chandler, Inc. on this panel. He's not sure if he's journalized the entries correctly, and asks you to review them. You find that one entry is correct, but the other is incorrect.

Determine which entry is incorrect, and journalize both closing entries for Chandler, Inc. as of Dec. 31.

Journal Page 25
Date Description Post. Ref. Debit Credit
Dec. 31 Retained Earnings   471,600  
      Fees Earned     185,600
      Rent Revenue     92,000
      Interest Revenue     17,200
      Salaries Expense     71,000
      Selling Expense     25,600
      Income Taxes Expense     15,000
      Depreciation Expense     47,200
      Insurance Expense     17,000
      Miscellaneous Expense     1,000
         
Dec. 31 Retained Earnings   5,000  
      Dividends     5,000

Journal

Roscoe has attempted to journalize the closing entries for Chandler, Inc. on the Roscoe's Journal panel. He's not sure if he's journalized the entries correctly, and asks you to review them. You find that one entry is correct, but the other is incorrect.

Determine which entry is incorrect, and journalize both closing entries for Chandler, Inc. as of Dec. 31. If an amount box does not require an entry, leave it blank.

Dec. 31      
       
       
       
       
       
       
       
       
       
Dec. 31      
       

Post-Closing Trial Balance

The post-closing trial balance shows all the permanent accounts with their updated values after the temporary accounts have been reduced to zero balance for the next accounting cycle. Also, the post-closing trial balance is meant to ensure that debits equal credits post-close.

Roscoe is very happy with your work on the closing entries for Chandler, Inc., and asks if you would prepare a post-closing trial balance for the company. If an amount box does not require an entry, leave it blank.

Chandler, Inc.
Post-Closing Trial Balance
December 31, 2017
Account Title Debit Balances Credit Balances
Cash    
Accounts Receivable    
Prepaid Insurance    
Office Equipment    
Accumulated Depreciation-Office Equipment    
Accounts Payable    
Salaries Payable    
Income Taxes Payable    
Common Stock    
Retained Earnings    
     

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Trial Balance and Adjustement Entries

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