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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem

Exercise 3-59 Preparation of Closing Entries

Grand Rapids Consulting Inc. began 2019 with a retained earnings balance of $38,100 and has the following accounts and balances at year end:

Required:

1. Prepare the closing entries made by Grand Rapids Consulting at the end of 2019.

2. Prepare Grand Rapids Consulting’s retained earnings statement for 2019.

To determine

Concept Introduction:

Closing Entries: Closing entries is the process of closing temporary accounts at the end of year. Closing entries are prepared after preparing the adjusted trial balance. In the process of closing entries following steps are follows in the form of journal entries:

  1. Closing all revenue accounts by debiting the revenue accounts and crediting Income Summary Account.
  2. Closing all expenses by debiting the Income Summary accounts and crediting all expenses accounts.
  3. Closing the net income by debiting the Income Summary accounts and crediting Capital or Retained earrings account.
  4. Closing the withdrawals accounts by debiting the Capital or Retained earrings account and crediting the withdrawal account.

Requirement-1; To Prepare:

The closing entries for the year.

Explanation

The closing entries for the year are explained as follows:

    Grand Rapids Consulting Inc.
    Closing entries
    For the year ending on Dec. 31, 2019
    Date Account TitleDebit Credit
    Dec. 31Sales Revenue $ 162,820
    Income Summary $ 162,820
    (Being Revenue accounts closed)
    Dec...
To determine

Concept Introduction:

Closing Entries: Closing entries is the process of closing temporary accounts at the end of year. Closing entries are prepared after preparing the adjusted trial balance. In the process of closing entries following steps are follows in the form of journal entries:

  1. Closing all revenue accounts by debiting the revenue accounts and crediting Income Summary Account.
  2. Closing all expenses by debiting the Income Summary accounts and crediting all expenses accounts.
  3. Closing the net income by debiting the Income Summary accounts and crediting Capital or Retained earrings account.
  4. Closing the withdrawals accounts by debiting the Capital or Retained earrings account and crediting the withdrawal account.

Requirement-2; To Prepare:

The Statement of retained earnings.

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