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Q3TI-1

Expert-verified
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:

Date

Accounts and Explanation

Debit

Credit

Dec. 31

Service Revenue

$1600

Income Summary

$1,600

To close revenue.

Dec. 31

Income Summary

$2,300

Rent Expense

$500

Salaries Expense

$800

Supplies Expense

$100

Utilities Expense

$600

Depreciation Expense—Equipment

$300

To close expenses.

Dec. 31

Retained Earnings

$700

Income Summary

$700

To close Income Summary.

Dec. 31

Retained Earnings

$2,100

Dividends

$2,100

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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