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Horngren'S Financial And Managerial Accounting
Found in: Page 199

Short Answer

Benson Auto Repair had the following account balances after adjustments. Assume all accounts had normal balances.

Cash $ 4,000 Common Stock $ 20,000

Accounts Receivable 3,200 Retained Earnings, January 1 15,700

Prepaid Rent 1,900 Dividends 2,100

Office Supplies 3,000 Service Revenue 1,600

Equipment 34,800 Depreciation Expense—Equipment 300

Accumulated Depreciation—Equipment 1,600 Salaries Expense 800

Accounts Payable 5,400 Rent Expense 500

Notes Payable (long-term) 7,000 Utilities Expense 600

Supplies Expense 100

14. Prepare the closing entries for Benson at December 31.

15. What is the balance of Retained Earnings after closing entries have been recorded? (Use a T-account to determine the balance.)

Closing entries are as follows:


Accounts and Explanation



Dec. 31

Service Revenue


Income Summary


To close revenue.

Dec. 31

Income Summary


Rent Expense


Salaries Expense


Supplies Expense


Utilities Expense


Depreciation Expense—Equipment


To close expenses.

Dec. 31

Retained Earnings


Income Summary


To close Income Summary.

Dec. 31

Retained Earnings




To close Dividends.

See the step by step solution

Step by Step Solution

Step 1: Explanation on Retained Earnings

Retained earnings are the sum total of previous profits of the previous years, which are used to pay the dividends.

Step 2: Calculation of Net Loss

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