I have 2 questions.1. I am not sure if I am calculating the "net income" and "earnings before taxes" (EBT) correctly.Are the numbers suppose to match? Please explain how to calculate the two given the below Income Statement.Formulas:Net Income = Revenue - ExpensesEBT = Revenue - (Expenses - taxes) 2. How do I create closing entries for the expenses to set them to zero for the next accounting cycle.My understanding is a T-account needs to be created for the expenses and adjustments made so the Dr and Cr balance to 0. Closing Entry: Account Name Dr Cr Revenues $ 1,745,670.41 Retained Earning $ 1,745,670.41 Closing Entry: Account Name Dr Cr Income $ 1,167,058.20 Expenses Wage Expense $866,004.00 Wage Tax expense $57,829.08 Medical Insurance Expense $32,400.00 Auto Insurance Expense $4,140.00 Interest Expense $16,492.92 Electrical & Gas Service Expense $6,736.80 Liability Insurance Expense $14,805.20 Telecommunications Expense $1,821.00 Cell Phone Service Expense $3,660.00 Postage Expense $555.75 Professional Services Expense $8,437.50 Maintenance Expense $4,716.00 Office supplies expense $30,196.00 Dry Cleaning Expense $1,703.75 Storefront Paper Supplies Expense $3,374.25 Rental Expense $19,008.00 Waste Serices Expense $600.00 Car Maintenance and Fuel Expense $3,956.40 Repair Expense $1,508.75 Water Expense $1,557.50 Soda Machine Repair and CO2 Expense $4,728.00 Credit Card Expense $3,714.30 Cooking Supplies Expense $47,745.00 Banking Fees $1,560.00 Depreciation Expense: Equipment $16,608.00 Depreciation Expense: Plant & Property $13,200.00 Close Expenses to Income Summary Closing Entry: Account Name Dr Cr Retained Earnings $ 13,125.00 Dividends $13,125.00 Close Divends to Retained Earnings Acct #s Annual FS 2021 4100 Sales Revenue: Corporate Accounts $1,400,353.41 4101 Sales Revenues: Storefront $345,317.00 Total Sales Revenue $1,745,670.41 5000 Cost of Goods Sold:Ingredients $264,716.87 5010 Cost of Goods Sold: Boxes and Cupcake cups $15,389.90 5020 Cost of Goods Sold: Beverages $23,081.20 Total COGS $303,187.97 Gross Profit $1,442,482.44 4102 Interest Revenue $306.00 Gross Profit Plus Interest Revenue $1,442,788.44 Expenses 6200 Wage Expense $866,004.00 6201-6205 Wage Tax expense $57,829.08 7001 Medical Insurance Expense $32,400.00 7002 Auto Insurance Expense $4,140.00 7003 Interest Expense $16,492.92 7004 Electrical & Gas Service Expense $6,736.80 7005 Liability Insurance Expense $14,805.20 7006 Telecommunications Expense $1,821.00 7007 Cell Phone Service Expense $3,660.00 7010 Postage Expense $555.75 7011 Professional Services Expense $8,437.50 7012 Maintenance Expense $4,716.00 7013 Office supplies expense $30,196.00 7014 Dry Cleaning Expense $1,703.75 7015 Storefront Paper Supplies Expense $3,374.25 7016 Rental Expense $19,008.00 7017 Waste Serices Expense $600.00 7018 Car Maintenance and Fuel Expense $3,956.40 7019 Repair Expense $1,508.75 7020 Water Expense $1,557.50 7021 Soda Machine Repair and CO2 Expense $4,728.00 7022 Credit Card Expense $3,714.30 7023 Cooking Supplies Expense $47,745.00 7024-7025 Banking Fees $1,560.00 Selling and Admin Expenses $1,137,250.20 8000 Depreciation Expense: Equipment $16,608.00 8010 Depreciation Expense: Plant & Property $13,200.00 Total Depreciation Expense $29,808.00 Total Expenses $1,167,058.20 Earnings before Taxes $275,730.24 diff 6207 Corporate Income Tax Expense $93,746.98 Net Income $275,730.24 diff Earnings per share Statement of Change in Owner's Equity Beginning Common Stock (par $1) $50,000.00 Beginning APIC $120,075.91 Plus: Common Stock Issued $0.00 Ending Common Stock $170,075.91 Beginning Retained Earnings $402,066.22 Plus Net income $275,730.24 3300 Less: Dividends Paid $13,125.00 Ending Retained Earnings $664,671.46

I have 2 questions.1. I am not sure if I am calculating the "net income" and "earnings before taxes" (EBT) correctly.Are the numbers suppose to match? Please explain how to calculate the two given the below Income Statement.Formulas:Net Income = Revenue - ExpensesEBT = Revenue - (Expenses - taxes) 2. How do I create closing entries for the expenses to set them to zero for the next accounting cycle.My understanding is a T-account needs to be created for the expenses and adjustments made so the Dr and Cr balance to 0. Closing Entry: Account Name Dr Cr Revenues $ 1,745,670.41 Retained Earning $ 1,745,670.41 Closing Entry: Account Name Dr Cr Income $ 1,167,058.20 Expenses Wage Expense $866,004.00 Wage Tax expense $57,829.08 Medical Insurance Expense $32,400.00 Auto Insurance Expense $4,140.00 Interest Expense $16,492.92 Electrical & Gas Service Expense $6,736.80 Liability Insurance Expense $14,805.20 Telecommunications Expense $1,821.00 Cell Phone Service Expense $3,660.00 Postage Expense $555.75 Professional Services Expense $8,437.50 Maintenance Expense $4,716.00 Office supplies expense $30,196.00 Dry Cleaning Expense $1,703.75 Storefront Paper Supplies Expense $3,374.25 Rental Expense $19,008.00 Waste Serices Expense $600.00 Car Maintenance and Fuel Expense $3,956.40 Repair Expense $1,508.75 Water Expense $1,557.50 Soda Machine Repair and CO2 Expense $4,728.00 Credit Card Expense $3,714.30 Cooking Supplies Expense $47,745.00 Banking Fees $1,560.00 Depreciation Expense: Equipment $16,608.00 Depreciation Expense: Plant & Property $13,200.00 Close Expenses to Income Summary Closing Entry: Account Name Dr Cr Retained Earnings $ 13,125.00 Dividends $13,125.00 Close Divends to Retained Earnings Acct #s Annual FS 2021 4100 Sales Revenue: Corporate Accounts $1,400,353.41 4101 Sales Revenues: Storefront $345,317.00 Total Sales Revenue $1,745,670.41 5000 Cost of Goods Sold:Ingredients $264,716.87 5010 Cost of Goods Sold: Boxes and Cupcake cups $15,389.90 5020 Cost of Goods Sold: Beverages $23,081.20 Total COGS $303,187.97 Gross Profit $1,442,482.44 4102 Interest Revenue $306.00 Gross Profit Plus Interest Revenue $1,442,788.44 Expenses 6200 Wage Expense $866,004.00 6201-6205 Wage Tax expense $57,829.08 7001 Medical Insurance Expense $32,400.00 7002 Auto Insurance Expense $4,140.00 7003 Interest Expense $16,492.92 7004 Electrical & Gas Service Expense $6,736.80 7005 Liability Insurance Expense $14,805.20 7006 Telecommunications Expense $1,821.00 7007 Cell Phone Service Expense $3,660.00 7010 Postage Expense $555.75 7011 Professional Services Expense $8,437.50 7012 Maintenance Expense $4,716.00 7013 Office supplies expense $30,196.00 7014 Dry Cleaning Expense $1,703.75 7015 Storefront Paper Supplies Expense $3,374.25 7016 Rental Expense $19,008.00 7017 Waste Serices Expense $600.00 7018 Car Maintenance and Fuel Expense $3,956.40 7019 Repair Expense $1,508.75 7020 Water Expense $1,557.50 7021 Soda Machine Repair and CO2 Expense $4,728.00 7022 Credit Card Expense $3,714.30 7023 Cooking Supplies Expense $47,745.00 7024-7025 Banking Fees $1,560.00 Selling and Admin Expenses $1,137,250.20 8000 Depreciation Expense: Equipment $16,608.00 8010 Depreciation Expense: Plant & Property $13,200.00 Total Depreciation Expense $29,808.00 Total Expenses $1,167,058.20 Earnings before Taxes $275,730.24 diff 6207 Corporate Income Tax Expense $93,746.98 Net Income $275,730.24 diff Earnings per share Statement of Change in Owner's Equity Beginning Common Stock (par $1) $50,000.00 Beginning APIC $120,075.91 Plus: Common Stock Issued $0.00 Ending Common Stock $170,075.91 Beginning Retained Earnings $402,066.22 Plus Net income $275,730.24 3300 Less: Dividends Paid $13,125.00 Ending Retained Earnings $664,671.46

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

2. How do I create closing entries for the expenses to set them to zero for the next accounting cycle.

My understanding is a T-account needs to be created for the expenses and adjustments made so the Dr and Cr balance to 0.

Closing Entry:
Account Name		Dr	Cr
Revenues		$ 1,745,670.41

	Retained Earning		$ 1,745,670.41



Closing Entry:
Account Name		Dr	Cr

Income		$ 1,167,058.20

	Expenses
	Wage Expense		$866,004.00
	Wage Tax expense		$57,829.08
	Medical Insurance Expense		$32,400.00
	Auto Insurance Expense		$4,140.00
	Interest Expense		$16,492.92
	Electrical & Gas Service Expense		$6,736.80
	Liability Insurance Expense		$14,805.20
	Telecommunications Expense		$1,821.00
	Cell Phone Service Expense		$3,660.00
	Postage Expense		$555.75
	Professional Services Expense		$8,437.50
	Maintenance Expense		$4,716.00
	Office supplies expense		$30,196.00
	Dry Cleaning Expense		$1,703.75
	Storefront Paper Supplies Expense		$3,374.25
	Rental Expense		$19,008.00
	Waste Serices Expense		$600.00
	Car Maintenance and Fuel Expense		$3,956.40
	Repair Expense		$1,508.75
	Water Expense		$1,557.50
	Soda Machine Repair and CO2 Expense		$4,728.00
	Credit Card Expense		$3,714.30
	Cooking Supplies Expense		$47,745.00
	Banking Fees		$1,560.00
	Depreciation Expense: Equipment		$16,608.00
	Depreciation Expense: Plant & Property		$13,200.00

Close Expenses to Income Summary


Closing Entry:
Account Name		Dr	Cr
Retained Earnings		$ 13,125.00
	Dividends		$13,125.00
Close Divends to Retained Earnings

Acct #s		Annual FS 2021
4100	Sales Revenue: Corporate Accounts	$1,400,353.41
4101	Sales Revenues: Storefront	$345,317.00
	Total Sales Revenue	$1,745,670.41
5000	Cost of Goods Sold:Ingredients	$264,716.87
5010	Cost of Goods Sold: Boxes and Cupcake cups	$15,389.90
5020	Cost of Goods Sold: Beverages	$23,081.20
	Total COGS	$303,187.97
	Gross Profit	$1,442,482.44
4102	Interest Revenue	$306.00
	Gross Profit Plus Interest Revenue	$1,442,788.44

	Expenses
6200	Wage Expense	$866,004.00
6201-6205	Wage Tax expense	$57,829.08
7001	Medical Insurance Expense	$32,400.00
7002	Auto Insurance Expense	$4,140.00
7003	Interest Expense	$16,492.92
7004	Electrical & Gas Service Expense	$6,736.80
7005	Liability Insurance Expense	$14,805.20
7006	Telecommunications Expense	$1,821.00
7007	Cell Phone Service Expense	$3,660.00
7010	Postage Expense	$555.75
7011	Professional Services Expense	$8,437.50
7012	Maintenance Expense	$4,716.00
7013	Office supplies expense	$30,196.00
7014	Dry Cleaning Expense	$1,703.75
7015	Storefront Paper Supplies Expense	$3,374.25
7016	Rental Expense	$19,008.00
7017	Waste Serices Expense	$600.00
7018	Car Maintenance and Fuel Expense	$3,956.40
7019	Repair Expense	$1,508.75
7020	Water Expense	$1,557.50
7021	Soda Machine Repair and CO2 Expense	$4,728.00
7022	Credit Card Expense	$3,714.30
7023	Cooking Supplies Expense	$47,745.00
7024-7025	Banking Fees	$1,560.00
	Selling and Admin Expenses	$1,137,250.20

8000	Depreciation Expense: Equipment	$16,608.00
8010	Depreciation Expense: Plant & Property	$13,200.00
	Total Depreciation Expense
		$29,808.00
	Total Expenses	$1,167,058.20

	Earnings before Taxes	$275,730.24	diff

6207	Corporate Income Tax Expense	$93,746.98
	Net Income	$275,730.24	diff
	Earnings per share

	Statement of Change in Owner's Equity
	Beginning Common Stock (par $1)	$50,000.00
	Beginning APIC	$120,075.91
	Plus: Common Stock Issued	$0.00
	Ending Common Stock	$170,075.91

	Beginning Retained Earnings	$402,066.22
	Plus Net income	$275,730.24
3300	Less: Dividends Paid	$13,125.00
	Ending Retained Earnings	$664,671.46

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