exercise 4 - 9 preparing closing entries and a post - closing trial balance p2. following are accounts and…

exercise 4 - 9 preparing closing entries and a post - closing trial balance p2. following are accounts and year - end adjusted balances of cruz company as of december 31. 1. prepare the december 31 closing entries. the account number for income summary is 901. 2. prepare the december 31 post - closing trial balance. note: the a. cruz, capital account balance $47,600 on december 31 of the prior year. no. account title debit credit 101 cash $19,000 126 supplies 13,000 128 prepaid insurance 3,000 167 equipment 24,000 168 accumulated depreciation - equipment $ 7,500 301 a. cruz, capital 47,600 302 a. cruz, withdrawals 7,000 403 services revenue 44,000 612 depreciation expense - equipment 3,000 622 salaries expense 22,000 637 insurance expense 2,500 640 rent expense 3,400 652 supplies expense 2,200 totals $99,100 $99,100

exercise 4 - 9 preparing closing entries and a post - closing trial balance p2. following are accounts and year - end adjusted balances of cruz company as of december 31. 1. prepare the december 31 closing entries. the account number for income summary is 901. 2. prepare the december 31 post - closing trial balance. note: the a. cruz, capital account balance $47,600 on december 31 of the prior year. no. account title debit credit 101 cash $19,000 126 supplies 13,000 128 prepaid insurance 3,000 167 equipment 24,000 168 accumulated depreciation - equipment $ 7,500 301 a. cruz, capital 47,600 302 a. cruz, withdrawals 7,000 403 services revenue 44,000 612 depreciation expense - equipment 3,000 622 salaries expense 22,000 637 insurance expense 2,500 640 rent expense 3,400 652 supplies expense 2,200 totals $99,100 $99,100

Answer

Explanation:

Step1: Close revenue account

Debit Services revenue ($44,000) and credit Income Summary (account 901) for $44,000. Journal - entry: Debit: Services revenue (403) $44,000 Credit: Income Summary (901) $44,000

Step2: Close expense accounts

Sum up all expense accounts: $3,000 (Depreciation expense - Equipment)+$22,000 (Salaries expense)+$2,500 (Insurance expense)+$3,400 (Rent expense)+$2,200 (Supplies expense) = $33,100. Debit Income Summary (901) for $33,100 and credit each expense account for its respective amount. Journal - entries: Debit: Income Summary (901) $33,100 Credit: Depreciation expense - Equipment (612) $3,000 Credit: Salaries expense (622) $22,000 Credit: Insurance expense (637) $2,500 Credit: Rent expense (640) $3,400 Credit: Supplies expense (652) $2,200

Step3: Close Income Summary account

Calculate the balance in Income Summary: $44,000 - $33,100=$10,900 (credit balance). Debit Income Summary (901) for $10,900 and credit A. Cruz, Capital for $10,900. Journal - entry: Debit: Income Summary (901) $10,900 Credit: A. Cruz, Capital (301) $10,900

Step4: Close withdrawals account

Debit A. Cruz, Capital for $7,000 and credit A. Cruz, Withdrawals (302) for $7,000. Journal - entry: Debit: A. Cruz, Capital (301) $7,000 Credit: A. Cruz, Withdrawals (302) $7,000

Step5: Prepare post - closing trial balance

List all permanent accounts (assets, liabilities, and owner's equity) and their balances.

No. Account Title Debit Credit
101 Cash $19,000
126 Supplies $13,000
128 Prepaid insurance $3,000
167 Equipment $24,000
168 Accumulated depreciation - Equipment $7,500
301 A. Cruz, Capital ($47,600 + $10,900 - $7,000) $51,500
Total $59,000 $59,000

Answer:

  1. Closing entries:
    • Debit: Services revenue (403) $44,000; Credit: Income Summary (901) $44,000
    • Debit: Income Summary (901) $33,100; Credit: Depreciation expense - Equipment (612) $3,000, Salaries expense (622) $22,000, Insurance expense (637) $2,500, Rent expense (640) $3,400, Supplies expense (652) $2,200
    • Debit: Income Summary (901) $10,900; Credit: A. Cruz, Capital (301) $10,900
    • Debit: A. Cruz, Capital (301) $7,000; Credit: A. Cruz, Withdrawals (302) $7,000
  2. Post - closing trial balance: | No. | Account Title | Debit | Credit | | ---- | ---- | ---- | ---- | | 101 | Cash | $19,000 | | | 126 | Supplies | $13,000 | | | 128 | Prepaid insurance | $3,000 | | | 167 | Equipment | $24,000 | | | 168 | Accumulated depreciation - Equipment | | $7,500 | | 301 | A. Cruz, Capital | | $51,500 | | Total | | $59,000 | $59,000 |