Assume that the entry closing total revenues of $3,190,000 and total expenses of$2,350,000 has been made for the year. At the end of the fiscal year, Teresa Schafer, Capital has a credit balance of $1,885,000 and Teresa Schafer, Drawing has a balance of$770,000. (a) Journalize the entry required to close the Teresa Schafer, Drawing account. (b) Determine the amount of Teresa Schafer, Capital at the end of the period.

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Solutions

Chapter
Section
Chapter 4, Problem 16E
Textbook Problem

Assume that the entry closing total revenues of $3,190,000 and total expenses of$2,350,000 has been made for the year. At the end of the fiscal year, Teresa Schafer, Capital has a credit balance of $1,885,000 and Teresa Schafer, Drawing has a balance of$770,000. (a) Journalize the entry required to close the Teresa Schafer, Drawing account. (b) Determine the amount of Teresa Schafer, Capital at the end of the period.

Expert Solution

a.

To determine

Journalize the closing entries.

Explanation of Solution

Closing entries: Closing entries are recorded in order to close the temporary accounts such as incomes and expenses by transferring them to the permanent accounts. It is passed at the end of the accounting period, to transfer the final balance.

Rules of Debit and Credit:

• Debit, the revenue account and owners capital account balance. In addition debit owners capital account if it suffer loss (net loss).
• Credit, the expense account, owners’ capital if it earns income (net income) and owners’ drawing account balance.

Closing entry of owner’s drawings to capital:

 Date Accounts title and explanation Post Ref...
Expert Solution

b.

To determine

Calculate the amount of TS, capital at the end of the period.

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