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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

After all revenue and expenses have been closed at the end of the fiscal period ended December 31, Income Summary has a debit of $45,550 and a credit of $36,520. On the same date, D. Mau, Drawing has a debit balance of $12,000 and D. Mau, Capital had a beginning credit balance of $63,410.

  1. a. Journalize the entries to close the remaining temporary accounts.
  2. b. What is the new balance of D. Mau, Capital after closing the remaining temporary accounts? Show your calculations.

a.

To determine

Prepare closing entries for the remaining temporary accounts.

Explanation

Prepare closing entries for the remaining temporary accounts.

Close the net loss to Capital account.

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
December31DM, Capital 9,030 
   Income Summary  9,030
  (Record closing of net loss to capital account)   

Table (1)

Description:

  • DM, Capital is a capital account. Since net loss is transferred to the account, the value decreased, and a decrease in capital is debited.
  • Income Summary is a clearing account which closes revenue, expense, drawings, and net of revenues and expenses to capital accounts. Since net loss is closed, the account is reversed, hence, the Income Summary account is credited.

Working Note 1:

Compute net income (loss)...

b.

To determine

Compute the balance in capital account after the closing process.

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