Chapter 4, Problem 4.2BPR

Financial statements and closing entries

The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2018, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:

Instructions

1. Prepare an income statement, a retained earnings statement, and a balance sheet.

2. Journalize the entries that were required to close the accounts at October 31.

3. If the balance of Retained Earnings had instead increased $115,000 after the closing entries were posted, and the dividends remained the same, what would have been the amount of net income or net loss?