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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

Problem 3-69B Preparation of Closing Entries and an Income Statement

Port Austin Boat Repair Inc. has entered and posted its adjusting entries for 2019. The following are selected account balances after adjustment:

Required:

  1. Using the accounts and balances above, prepare the closing entries for 2019.
  2. Prepare an income statement for port Austin Boat Repair.

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:

    Port Austin Boat Repair Inc.
    Closing entries
    For the year 2019
    Date Account TitleDebit Credit
    Dec. 31Service Revenue $ 692,500
    Interest Income $ 7,600
    Income Summary $ 700,100
    (Being Revenue accounts closed)
    Dec. 31Income Summary $ 650,850
    Depreciation Expense $ 20,000
    Insurance Expense $ 94,300
    Income Tax Expense
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 Income statement for the year.

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