1. Closing entries Nashville Nets Inc. Adjusted Trial Balance De cember 31, 2018 Debit Credit Common Stock, Par $ 0.10 A PIC (Additional Paid in Capital in Excess of Par) 1,000,000 9,000,000 Retained Earnings 25,000,000 DNidends Pald 2,400,000 Sales 105,350,000 Sales Discounts 1,250,000 Costof Goods Sold (COas) 41,950,000 Selling Expenses 14,150,000 Adm inistrative Expenses 3,340,000 Rent Revenue 120,000 Loss on sale of equipment 50,000 Income Tax Expense 21.580,000 Items to incorporate into your instruction manual for closing entries (including the partial trial balance provided above) are as follows 1 • How does the accountant know that the Retained Earnings balance of $25 million is the balance as of the beginning of the year? • Using the balances provided above, how could a quick addition/subtraction exercise on your calculator provide net income? • How could the accountant calculate ending retained earnings without preparing the retained earnings statement? • Explain the closing process utilizing the income summary account. Provide "T" accounts in your explanation along with the journal entries.
1. Closing entries Nashville Nets Inc. Adjusted Trial Balance De cember 31, 2018 Debit Credit Common Stock, Par $ 0.10 A PIC (Additional Paid in Capital in Excess of Par) 1,000,000 9,000,000 Retained Earnings 25,000,000 DNidends Pald 2,400,000 Sales 105,350,000 Sales Discounts 1,250,000 Costof Goods Sold (COas) 41,950,000 Selling Expenses 14,150,000 Adm inistrative Expenses 3,340,000 Rent Revenue 120,000 Loss on sale of equipment 50,000 Income Tax Expense 21.580,000 Items to incorporate into your instruction manual for closing entries (including the partial trial balance provided above) are as follows 1 • How does the accountant know that the Retained Earnings balance of $25 million is the balance as of the beginning of the year? • Using the balances provided above, how could a quick addition/subtraction exercise on your calculator provide net income? • How could the accountant calculate ending retained earnings without preparing the retained earnings statement? • Explain the closing process utilizing the income summary account. Provide "T" accounts in your explanation along with the journal entries.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:# Closing Entries and Retained Earnings Explanation
## Closing Entries
### Adjusted Trial Balance for Nashville Nets Inc.
**Date:** December 31, 2018
| Description | Debit | Credit |
|--------------------------------------------------|--------------|-------------|
| Common Stock, Par ($0.10) | | $1,000,000 |
| APIC (Additional Paid in Capital in Excess of Par)| | $9,000,000 |
| Retained Earnings | | $25,000,000 |
| Dividends Paid | $2,400,000 | |
| **Sales** | | $105,350,000|
| Sales Discounts | $1,250,000 | |
| Cost of Goods Sold (COGS) | $41,950,000 | |
| Selling Expenses | $14,150,000 | |
| Administrative Expenses | $3,340,000 | |
| Rent Revenue | | $120,000 |
| Loss on Sale of Equipment | $50,000 | |
| Income Tax Expense | $21,580,000 | |
### Items to Incorporate into Your Instruction Manual
- **Understanding Retained Earnings Balance:** Explanation of how the accountant can verify the Retained Earnings balance of $25 million as of the beginning of the year.
- **Quick Calculations for Net Income:** Methods for performing a quick addition/subtraction exercise using the provided balances to derive net income.
- **Calculating Ending Retained Earnings:** Determining ending retained earnings without preparing a retained earnings statement.
- **Closing Process Using Income Summary Account:** Details on the closing process with “T” accounts and journal entries.
## Retained Earnings Statement
- **Purpose of the Retained Earnings Statement:** Explanation of what the retained earnings statement calculates.
- **Inclusion of Dividends:** Understanding why dividends are only included in the retained earnings statement.
- **Note:** Addressing an error in last month’s financials regarding the double counting of dividends.
This educational guide explains the detailed aspects of closing entries and provides a structured approach to understanding retained earnings with practical accounting exercises.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education