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Financial statements and closing entries Finders Investigative Services is an investigative services firm that is owned and operated by Stacy Tanner. On June 30, 2019, the end of the fiscal year, the accountant for Finders Investigative Services prepared an end-of-period spreadsheet, a part of which follows: Instructions 1. Prepare an income statement, a statement of owner's equity (no additional investments were made during the year), and a balance sheet. 2. Journalize the entries that were required to close the accounts at June 30. 3 If Stacy Tanner, Capital has instead decreased $30,000 after the closing entries were posted, and the withdrawals remained the same, what would have been the amount of net income or net loss?

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Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
Chapter 4, Problem 4.2APR
Textbook Problem
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Financial statements and closing entries

Finders Investigative Services is an investigative services firm that is owned and operated by Stacy Tanner. On June 30, 2019, the end of the fiscal year, the accountant for Finders Investigative Services prepared an end-of-period spreadsheet, a part of which follows:

Chapter 4, Problem 4.2APR, Financial statements and closing entries Finders Investigative Services is an investigative services

Instructions

1.    Prepare an income statement, a statement of owner's equity (no additional investments were made during the year), and a balance sheet.

2.    Journalize the entries that were required to close the accounts at June 30.

3    If Stacy Tanner, Capital has instead decreased $30,000 after the closing entries were posted, and the withdrawals remained the same, what would have been the amount of net income or net loss?

1.

To determine

Prepare an income statement, a statement of stockholders’ equity, and a balance sheet.

Explanation of Solution

Financial statements: Financial statements of a company comprises of Balance Sheet, Income Statement, Statement of Owners’ Equity and Statement of Cash Flows. All these financial statements represent various aspects of the financial soundness of the company and help its various stakeholders to take informed decisions.

Closing entries: Closing entries are required in order to close the temporary accounts such as income and expenditure account by transferring them to the permanent accounts. Closing entries are passed at the end of the accounting period, to prepare the financial statements.

An income statement is one of the financial statement that matches the incomes and expenditures of an entity for a particular period of time in order to determine the net income earned or net loss incurred during that period.

Prepare the income statement of FI Services for the year ended June 30, 2019 as below:

FI Services
Income Statement
For the year ended June 30, 2019
ParticularsAmount ($)Amount ($)
Revenues:  
    Service fees$718,000 
    Rent revenue12,000 
Total revenues 730,000
Expenses:  
     Salaries Expense$522,100 
     Rent Expense48,000 
     Supplies Expense10,800 
     Depreciation Expense- Building8,750 
     Utilities Expense7,150 
     Repairs Expense3,000 
     Insurance Expense2,500 
     Miscellaneous Expense6,200 
    Total Expenses 608,500
Net Income $121,500

Table (1)

The statement of owners’ equity is one of the financial statements that show the claims of the owners on the resources of the entity...

2.

To determine

Journalize the closing entries for FI Services.

3.

To determine

Determine the net income or net loss if the capital has decreased $30,000, and the withdrawals remained the same after the closing entries were posted.

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Chapter 4 Solutions

Accounting
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