Chapter 4, Problem 1CP

a.

To determine

Journalize the transactions in the books of PS Services.

Explanation of Solution

Transaction 1:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Salaries Payable			1,000
			Cash			1,000
		(Record payment of salaries payable)

Table (1)

Description:

• Salaries Payable is a liability account. Since the liability to pay salaries has been paid off, liability decreased, and a decrease in liability is debited.
• Cash is an asset account. The amount is decreased because cash is paid, and a decrease in assets is credited.

Transaction 2:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Cash			42,000
			Common Stock			42,000
		(Record issuance of common stock)

Table (2)

Description:

• Cash is an asset account. The amount is increased because cash is received, and an increase in asset is debited.
• Common Stock is a stockholders’ equity account. Since stock is issued, equity amount increased, and an increase in equity is credited.

Transaction 3:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Prepaid Rent			6,000
			Cash			6,000
		(Record payment of rent in advance)

Table (3)

Description:

• Prepaid Rent is an asset account. Since rent is paid in advance, it is recorded as asset until it is consumed. So, asset value is increased, and an increase in asset is debited.
• Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction 4:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 1
		Supplies			800
			Cash			800
		(Record purchase of supplies)

Table (4)

Description:

• Supplies is an asset account. Since supplies are purchased, asset value increased, and an increase in asset is debited.
• Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction 5:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Merchandise Inventory			12,000
			Accounts Payable			12,000
		(Record purchase of merchandise on account)

Table (5)

Description:

• Merchandise Inventory is an asset account. Since merchandise is purchased, asset value increased, and an increase in asset is debited.
• Accounts Payable is a liability account. Since amount owed increased, liability increased, and an increase in liability is credited.

Transaction 6:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Accounts Payable			240
			Merchandise Inventory			240
		(Record merchandise purchased on account returned)

Table (6)

Description:

• Accounts Payable is a liability account. Since amount owed decreased, liability decreased, and a decrease in liability is debited.
• Merchandise Inventory is an asset account. Since merchandise purchased is returned, asset value decreased, and a decrease in asset is credited.

Transaction 7a:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Accounts Receivable			15,000
		Cash			500
			Sales Revenue			20,000
		(Record merchandise sold)

Table (7)

Description:

• Accounts Receivable is an asset account. The amount is increased because amount to be received increased, and an increase in asset is debited.
• Cash is an asset account. The amount is increased because cash is received, and an increase in asset is debited.
• Sales Revenue is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Sales Revenue account is credited.

Transaction 7b:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Cost of Goods Sold			9,440
			Merchandise Inventory			9,440
		(Record cost incurred for goods sold)

Table (8)

Description:

• Cost of Goods Sold is an expense account. Since losses and expenses decrease equity and a decrease in equity is debited, Cost of Goods Sold account is debited.
• Merchandise Inventory is an asset account. Since merchandise is sold, asset value decreased, and a decrease in asset is credited.

Transaction 8:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Salaries Expense			9,500
			Cash			9,500
		(Record payment of salaries expense )

Table (9)

Description:

• Salaries Expense is an expense account. Since losses and expenses decrease equity and a decrease in equity is debited, Salaries Expense account is debited.
• Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction 9:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Accounts Receivable			36,000
			Monitoring Service Revenue			36,000
		(Record services performed on account)

Table (10)

Description:

• Accounts Receivable is an asset account. The amount is increased because amount to be received increased, and an increase in asset is debited.
• Monitoring Service Revenue is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Monitoring Service Revenue account is credited.

Transaction 10:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Accounts Payable			8,000
			Cash			7,840
			Merchandise Inventory			160
		(Record cash paid for merchandise purchased on account within discount period)

Table (11)

Description:

• Accounts Payable is a liability account. Since amount owed is paid, liability decreased, and a decrease in liability is debited.
• Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.
• Merchandise Inventory is an asset account. Since merchandise purchased is returned, asset value decreased, and a decrease in asset is credited.

Working Notes:

Compute purchase discount.

$\begin{array}{c}\text{Purchase discount = }\left\{\begin{array}{l}\text{Purchases×}\\ \text{Purchase discount percentage}\end{array}\right\}\\ \text{= \$8,000×2\%}\\ \text{= \$160}\end{array}$

Transaction 11:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Accounts Payable			2,780
			Cash			2,780
		(Record cash paid for merchandise purchased on account after discount period)

Table (12)

Description:

• Accounts Payable is a liability account. Since amount owed is paid, liability decreased, and a decrease in liability is debited.
• Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction 12:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Cash			43,000
			Accounts Receivable			43,000
		(Record cash collected on merchandise sold on account)

Table (13)

Description:

• Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
• Accounts Receivable is an asset account. The sale allowance is granted on goods sold, and amount to be received decreased, and a decrease in asset is credited.

Transaction 13:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Accounts Receivable			9,000
		Cash			3,000
			Security Service Revenue			12,000
		(Record services performed for cash and on account)

Table (14)

Description:

• Accounts Receivable is an asset account. The amount is increased because amount to be received increased, and an increase in asset is debited.
• Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
• Security Service Revenue is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Security Service Revenue account is credited.

Transaction 14:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Advertising Expense			1,620
			Cash			1,620
		(Record payment of advertising expense)

Table (15)

Description:

• Advertising Expense is an expense account. Since losses and expenses decrease equity and a decrease in equity is debited, Advertising Expense account is debited.
• Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction 15:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Utilities Expense			1,100
			Cash			1,100
		(Record payment of utilities expense)

Table (16)

Description:

• Utilities Expense is an expense account. Since losses and expenses decrease equity and a decrease in equity is debited, Utilities Expense account is debited.
• Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction 16:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Dividends			12,000
			Cash			12,000
		(Record payment of cash dividends)

Table (17)

Description:

• Dividends is a contra stockholders’ equity account, and the contra equity accounts are debited, hence, debit Dividends account.
• Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction 17:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Supplies Expense			770
			Supplies			770
		(Record part of supplies consumed)

Table (18)

Description:

• Supplies Expense is an expense account. Since losses and expenses decrease equity and a decrease in equity is debited, Supplies Expense account is debited.
• Supplies is an asset account. Since amount of supplies is used, asset account decreased, and a decrease in asset is credited.

Working Note:

Determine supplies expense.

$\begin{array}{c}\text{Supplies expense = }\left(\begin{array}{l}\text{Opening balance + Purchases–}\\ \text{Closing balance of supplies}\end{array}\right)\\ \text{= \$120+\$800}-\text{\$150 }\\ \text{= \$770}\end{array}$

Transaction 18:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Rent Expense			5,000
			Prepaid Rent			5,000
		(Record part of prepaid rent expired)

Table (19)

Description:

• Rent Expense is an expense account. Since expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
• Prepaid Rent is an asset account. Since amount of rent is expired, asset account decreased, and a decrease in asset is credited.

Transaction 19:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Unearned Revenue			900
			Security Services Revenue			900
		(Record services performed for revenue received in advance)

Table (20)

Description:

• Unearned Revenue is a liability account. Since the unearned fees is earned, liability is reduced, and a decrease in liability is debited.
• Security Services Revenue is a revenue account. Since the unearned fees has been earned, revenue value increased. An increase in revenues increases stockholders’ equity, and an increase in equity is credited.

Transaction 20:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Salaries Expense			1,500
			Salaries Payable			1,500
		(Record accrued salaries expense)

Table (21)

Description:

• Salaries Expense is an expense account. Since expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
• Salaries Payable is a liability account. Since amount of payables has increased, liability decreased, and an increase in liability is credited.

b.

To determine

Post the beginning balances into T-accounts, and post the journal entries prepared in Part (a) into T-accounts.

Explanation of Solution

Post the beginning balances and journal entries prepared in Part (b) into T-accounts.

Cash
Beginning balance	$12,500	Salaries payable	$1,000
Common stock	42,000	Prepaid rent	6,000
Sales revenue	5,000	Supplies	800
Accounts receivable	43,000	Salaries expense	9,500
Security services revenue	3,000	Accounts payable	7,840
		Accounts payable	2,780
		Advertising expense	1,620
		Utilities expense	1,100
		Dividends	12,000
Total	105,500	Total	42,640
Balance	$62,860

Table (22)

Accounts Receivable
Beginning balance	$3,500	Cash	$43,000
Sales revenue	15,000
Monitoring service revenue	36,000
Security services revenue	9,000
Total	63,500	Total	43,000
Balance	$20,500

Table (23)

Supplies
Beginning balance	$120	Supplies Expense	$770
Cash	800
Total	920	Total	770
Balance	$150

Table (24)

Prepaid Rent
Beginning balance	$1,000	Rent Expense	5,000
Cash	6,000
Total	7,000	Total	5,000
Balance	$2,000

Table (25)

Merchandise Inventory
Accounts payable	$12,000	Accounts payable	$240
		Cost of goods sold	9,440
		Accounts payable	160
Total	12,000	Total	9,840
Balance	$2,160

Table (26)

Land
Beginning balance	$4,000
Total	4,000	Total	$0
Balance	$4,0000

Table (27)

Accounts Payable
Merchandise inventory	$240	Merchandise inventory	$12,000
Cash	7,840
Merchandise inventory	160
Cash	2,780
Total	11,020	Total	12,000
		Balance	$980

Table (28)

Unearned Revenue
Security services revenue	$900	Beginning balance	$900
Total	900	Total	900
		Balance	$0

Table (29)

Salaries Payable
Cash	$1,000	Beginning balance	$1,000
		Salaries expense	1,500
Total	1,000	Total	2,500
		Balance	$1,500

Table (30)

Common Stock
		Beginning balance	$8,000
		Cash	42,000
Total	$0	Total	50,000
		Balance	$50,000

Table (29)

Retained Earnings
		Beginning balance	$11,200
Total	$0	Total	11,200
		Balance	$11,200

Table (30)

Dividends
Cash	$12,000
Total	12,000	Total	$0
Balance	$12,000

Table (31)

Security Service Revenue
		Accounts receivable	$9,000
		Cash	3,000
		Unearned revenue	900
Total	$0	Total	12,900
		Balance	$12,900

Table (32)

Sales Revenue
		Accounts receivable	$15,000
		Cash	5,000
Total	$0	Total	20,000
		Balance	$20,000

Table (33)

Monitoring Service Revenue
		Accounts receivable	$36,000
Total	$0	Total	36,000
		Balance	$36,000

Table (34)

Cost of Goods Sold
Merchandise inventory	$9,440
Total	9,440	Total	$0
Balance	$9,440

Table (35)

Advertising Expense
Cash	$1,620
Total	1,620	Total	$0
Balance	$1,620

Table (36)

Rent Expense
Cash	$5,000
Total	5,000	Total	$0
Balance	$5,000

Table (37)

Salaries Expense
Cash	$9,500
Salaries payable	1,500
Total	11,000	Total	$0
Balance	$11,000

Table (38)

Supplies Expense
Cash	$770
Total	770	Total	$0
Balance	$770

Table (39)

Utilities Expense
Cash	$1,100
Total	1,100	Total	$0
Balance	$1,100

Table (40)

c.

To determine

Prepare the trial balance for PS Services as at December 31, Year 4.

Explanation of Solution

Trial balance: Trial balance is a summary of all the asset, liability, and equity accounts and their balances.

Prepare trial balance for PS Services as at December 31, Year 4.

PS Services
Trial Balance
December 31, Year 4
Account Titles	Debit ($)	Credit ($)
Cash	$62,860
Accounts Receivable	20,500
Supplies	150
Prepaid Rent	2,000
Merchandise Inventory	2,160
Land	4,000
Accounts Payable		$980
Salaries Payable		1,500
Common Stock		50,000
Retained Earnings		11,220
Dividends	12,000
Security Service Revenue		12,900
Alarm Sales Revenue		20,000
Monitoring Service Revenue		36,000
Cost of Goods Sold	9,440
Advertising Expense	1,620
Rent Expense	5,000
Salaries Expense	11,000
Supplies Expense	770
Utilities Expense	1,100
Totals	$132,600	$132,600

Table (41)

d.

To determine

Prepare a multistep income statement, statement of stockholders’ equity, balance sheet, and statement of cash flows for PS Services, based on the account balances derived in Part (c).

Explanation of Solution

Multi-step income statement: The income statement represented in multi-steps with several subtotals, to report the income from principal operations, and separate the other expenses and revenues which affect net income, is referred to as multi-step income statement.

Prepare a multistep income statement for PS Services for the year ended December 31, Year 4.

PS Services
Income Statement
For the Year Ended December 31, Year 4
Revenues:
Security service revenue	$12,900
Monitoring service revenue	36,000
Sales revenue	20,000
Total revenues		$68,900
Cost of goods sold		(9,440)
Gross margin		59,460
Operating expenses:
Advertising expense	$1,620
Rent expense	5,000
Salaries expense	11,000
Supplies expense	770
Utilities expense	1,100
Total operating expenses		19,490
Net income		$39,970

Table (42)

Statement of stockholders’ equity: The statement which reports the changes in stock, paid-in capital, retained earnings, and treasury stock, during the year is referred to as statement of stockholders’ equity.

Prepare a statement of stockholders’ equity for PS Services for the year ended December 31, Year 4.

PS Services
Statement of Stockholders’ Equity
For the Year Ended December 31, Year 4
Beginning common stock	$8,000
Stock issued	42,000
Ending common stock		$50,000
Beginning retained earnings	$11,220
Net income	39,970
Dividends	(12,000)
Ending retained earnings		39,140
Total stockholders’ equity		$84,190

Table (43)

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Prepare the balance sheet for PS Services as at December 31, Year 4.

PS Services
Balance Sheet
December 31, Year 4
Assets
Cash	$62,860
Accounts receivable	20,500
Supplies	150
Prepaid rent	2,000
Merchandise inventory	2,160
Land	4,000
Total assets		$91,670
Liabilities
Accounts payables	$980
Salaries payables	1,500
Total liabilities		$2,480
Stockholders’ equity
Common stock	50,000
Retained earnings	39,190
Total stockholders’ equity		89,190
Total liabilities and stockholders’ equity		$91,670

Table (44)

Statement of cash flows: Statement of cash flows reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities. Ending cash balance computed in balance sheet is required in statement of cash flows. Operating activities include cash inflows and outflows from business operations. Investing activities includes cash inflows and cash outflows from purchase and sale of land or equipment, or investments. Financing activities includes cash inflows and outflows from issuance of common stock and debt, payment of debt and dividends.

Prepare the statement of cash flows for PS Services for the year ended December 31, Year 4.

PS Services
Statement of Cash Flows
For the Year Ended December 31, Year 4
Cash flows from operating activities:
Cash inflow from customers	$51,000
Cash outflow for expenses	(30,640)
Net cash flow from operating activities		$20,360
Cash flows from investing activities
Cash flows from financing activities:		0
Cash from issue of common stock	42,000
Cash payments for dividends	(12,000)
Net cash flow from financing activities		30,000
Net change in cash		50,360
Add: Beginning cash balance		12,500
Ending cash balance		$62,860

Table (45)

Working Notes:

Compute cash received from customers.

$\begin{array}{c}\text{Cash receipts = }\left\{\begin{array}{l}\text{Cash sales+}\\ \text{Cash collected from accounts receivables}\end{array}\right\}\\ \text{=\$8,000+\$43,000}\\ \text{=\$51,000}\end{array}$

Compute cash paid for expenses.

$\begin{array}{c}\text{Cash payments = }\left\{\begin{array}{l}\text{Cash paid for prepaid rent+}\\ \text{Cash paid for salaries expense+}\\ \text{Cash paid for accounts payables+}\\ \text{Cash paid for advertising expense}\\ \text{Cash paid for supplies expense+}\\ \text{Cash paid for utilities expense+}\end{array}\right\}\\ \text{=\$6,000+\$10,500+\$10,620+\$1,620+\$800+\$1,100}\\ \text{=\$30,640}\end{array}$

e.

To determine

Prepare closing entries at the end of Year 4.

Explanation of Solution

Closing entries: The journal entries prepared to close the temporary accounts to Retained Earnings account are referred to as closing entries. The revenue, expense, and dividends accounts are referred to as temporary accounts because the information and figures in these accounts is held temporarily and consequently transferred to permanent account at the end of accounting year.

Prepare closing entries at the end of Year 4 for PS Services.

Closing revenues:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Sales Revenue			20,000
		Security Service Revenue			12,900
		Monitoring Service Revenue			36,000
			Retained Earnings			68,900
		(Record revenues being closed to Retained Earnings account)

Table (46)

Description:

• Sales Revenue, Security Service Revenue, and Monitoring Service Revenue are revenue accounts. Since revenues are closed to Retained Earnings account, the accounts are cancelled by debiting to reverse its effect.
• Retained Earnings is a stockholders’ equity account. Since revenues are transferred to the account, the value increased, and an increase in equity is credited.

Closing expenses:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Retained Earnings			28,930
			Cost of Goods Sold			9,440
			Advertising Expense			1,620
			Rent Expense			5,000
			Salaries Expense			11,000
			Supplies Expense			770
			Utilities Expense			1,100
		(Record expenses being closed to Retained Earnings account)

Table (47)

Description:

• Retained Earnings is a stockholders’ equity account. Since expenses are transferred to the account, the value decreased, and a decrease in equity is debited.
• Cost of Goods Sold, Advertising Expense, Rent Expense, Salaries Expense, Supplies Expense, and Utilities Expense are expenses accounts. Since expenses are closed to Retained Earnings account, the accounts are cancelled by crediting to reverse the effect.

Closing dividends:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
Year 4
		Retained Earnings			12,000
			Dividends			12,000
		(Record dividends being closed to Retained Earnings account)

Table (48)

Description:

• Retained Earnings is a stockholders’ equity account. Since dividends are transferred to the account, the value decreased, and a decrease in equity is debited.
• Dividends is a contra-equity account. Since dividends are closed to Retained Earnings account, the account is cancelled by crediting to reverse the effect.

f.

To determine

Post the closing entries prepared in Part (e) into T-accounts, and prepare post-closing trial balance for PS Services as at December 31, Year 4.

Explanation of Solution

Post the closing entries into T-accounts.

Cash
Balance	$62,860

Table (49)

Accounts Receivable
Balance	$20,500

Table (50)

Supplies
Balance	$150

Table (51)

Prepaid Rent
Balance	$2,000

Table (52)

Merchandise Inventory
Balance	$2,160

Table (53)

Land
Balance	$4,0000

Table (54)

Accounts Payable
		Balance	$980

Table (55)

Salaries Payable
		Balance	$1,500

Table (56)

Common Stock
		Balance	$50,000

Table (57)

Retained Earnings
		Beginning balance	$11,220
Total	$0	Total	11,220
		Balance	$11,220
Cost of goods sold	9,440	Security service revenue	12,900
Advertising expense	1,620	Sales revenue	20,000
Rent expense	5,000	Monitoring service revenue	36,000
Salaries expense	11,000
Supplies expense	770
Utilities expense	1,100
Dividends	12,000
Total	40,930	Total	80,120
		Balance	$39,190

Table (58)

Dividends
Cash	$12,000
Total	12,000	Total	$0
Balance	$12,000
		Retained earnings	$12,000
Total	12,000	Total	12,000
Balance	$0

Table (59)

Security Service Revenue
		Accounts receivable	$9,000
		Cash	3,000
		Unearned revenue	900
Total	$0	Total	12,900
		Balance	$12,900
Retained earnings	$12,900
Total	12,900	Total	12,900
		Balance	$0

Table (60)

Sales Revenue
		Accounts receivable	$15,000
		Cash	5,000
Total	$0	Total	20,000
		Balance	$20,000
Retained earnings	$20,000
Total	20,000	Total	20,000
		Balance	$0

Table (61)

Monitoring Service Revenue
		Accounts receivable	$36,000
Total	$0	Total	36,000
		Balance	$36,000
Retained earnings	$36,000
Total	36,000	Total	36,000
		Balance	$0

Table (62)

Cost of Goods Sold
Merchandise inventory	$9,440
Total	9,440	Total	$0
Balance	$9,440
		Retained earnings	$9,440
Total	9,440	Total	9,440
Balance	$0

Table (63)

Advertising Expense
Cash	$1,620
Total	1,620	Total	$0
Balance	$1,620
		Retained earnings	$1,620
Total	1,620	Total	1,620
Balance	$0

Table (64)

Rent Expense
Cash	$5,000
Total	5,000	Total	$0
Balance	$5,000
		Retained earnings	$5,000
Total	5,000	Total	5,000
Balance	$0

Table (65)

Salaries Expense
Cash	$9,500
Salaries payable	1,500
Total	11,000	Total	$0
Balance	$11,000
		Retained earnings	$11,000
Total	11,000	Total	11,000
Balance	$0

Table (66)

Supplies Expense
Cash	$770
Total	770	Total	$0
Balance	$770
		Retained earnings	$770
Total	770	Total	770
Balance	$0

Table (67)

Utilities Expense
Cash	$1,100
Total	1,100	Total	$0
Balance	$1,100
		Retained earnings	$1,100
Total	1,100	Total	1,100
Balance	$0

Table (68)

Post-closing trial balance: Post-closing trial balance is a summary of all the asset, liability, and equity accounts and their balances, after the closing entries are prepared. So, post-closing trial balance reports the balances of permanent accounts only.

Prepare post-closing trial balance for PS Services as of December 31, Year 4.

PS Services
Post-Closing Trial Balance
December 31, Year 4
Account Titles	Debit ($)	Credit ($)
Cash	$62,860
Accounts receivable	20,500
Supplies	150
Prepaid rent	2,000
Merchandise inventory	2,160
Land	4,000
Accounts payable		$980
Salaries payable		1,500
Common Stock		50,000
Retained earnings		39,190
Total	$91,670	$91,670

Table (69)