PA2. LO 5.1 The following selected accounts and normal balances existed at year-end. Make the four journal entries required to close the books: Accounts receivable Prepaid insurance Land Accounts payable Notes payable Retained earnings Dividends Fees earned revenue Selling expenses Administrative expenses Miscellaneous expense $45,000 4,500 50,000 39,000 55,000 12,000 2,000 65,000 34,500 12,750 1,250
PA2. LO 5.1 The following selected accounts and normal balances existed at year-end. Make the four journal entries required to close the books: Accounts receivable Prepaid insurance Land Accounts payable Notes payable Retained earnings Dividends Fees earned revenue Selling expenses Administrative expenses Miscellaneous expense $45,000 4,500 50,000 39,000 55,000 12,000 2,000 65,000 34,500 12,750 1,250
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**Closing Journal Entries**
To effectively close the books at year-end, it's important to make the following journal entries based on the given account balances. The accounts and their balances are listed below:
1. **Accounts with Debit Balances:**
- **Accounts receivable:** $45,000
- **Prepaid insurance:** $4,500
- **Land:** $50,000
- **Dividends:** $2,000
- **Selling expenses:** $34,500
- **Administrative expenses:** $12,750
- **Miscellaneous expense:** $1,250
2. **Accounts with Credit Balances:**
- **Accounts payable:** $39,000
- **Notes payable:** $55,000
- **Retained earnings:** $12,000
- **Fees earned revenue:** $65,000
**Procedure:**
- **Identify Temporary Accounts:** Dividends, selling expenses, administrative expenses, miscellaneous expense, and fees earned revenue are temporary accounts.
- **Close Revenues to Income Summary:**
- **Debit** Fees Earned Revenue: $65,000
- **Credit** Income Summary: $65,000
- **Close Expenses to Income Summary:**
- **Debit** Income Summary: (Total of all expenses)
- **Credit** Selling Expenses, Administrative Expenses, Miscellaneous Expense
- **Close Income Summary to Retained Earnings:**
- Calculate the net income/loss (Fees earned revenue - Total expenses).
- (Debit or credit depending on net income or loss)
- **Close Dividends to Retained Earnings:**
- **Debit** Retained Earnings: $2,000
- **Credit** Dividends: $2,000
This process ensures that temporary accounts are reset for the new accounting period and that profit or loss is reflected in retained earnings.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe74cda84-d639-4dc9-8434-22f254083a27%2F5ef2b77f-90d1-4c45-ba47-1c0dc9ea3e92%2Fqvyd4ga_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Closing Journal Entries**
To effectively close the books at year-end, it's important to make the following journal entries based on the given account balances. The accounts and their balances are listed below:
1. **Accounts with Debit Balances:**
- **Accounts receivable:** $45,000
- **Prepaid insurance:** $4,500
- **Land:** $50,000
- **Dividends:** $2,000
- **Selling expenses:** $34,500
- **Administrative expenses:** $12,750
- **Miscellaneous expense:** $1,250
2. **Accounts with Credit Balances:**
- **Accounts payable:** $39,000
- **Notes payable:** $55,000
- **Retained earnings:** $12,000
- **Fees earned revenue:** $65,000
**Procedure:**
- **Identify Temporary Accounts:** Dividends, selling expenses, administrative expenses, miscellaneous expense, and fees earned revenue are temporary accounts.
- **Close Revenues to Income Summary:**
- **Debit** Fees Earned Revenue: $65,000
- **Credit** Income Summary: $65,000
- **Close Expenses to Income Summary:**
- **Debit** Income Summary: (Total of all expenses)
- **Credit** Selling Expenses, Administrative Expenses, Miscellaneous Expense
- **Close Income Summary to Retained Earnings:**
- Calculate the net income/loss (Fees earned revenue - Total expenses).
- (Debit or credit depending on net income or loss)
- **Close Dividends to Retained Earnings:**
- **Debit** Retained Earnings: $2,000
- **Credit** Dividends: $2,000
This process ensures that temporary accounts are reset for the new accounting period and that profit or loss is reflected in retained earnings.
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