T-accounts have been opened using the balances from the adjusted trial balance. Post the closing entries to the t-accounts and calculate ending balances for each account. For accounts that have a zero balance, enter the zero on the normal balance side. Use the acronym for closing entries as post references and include Bal. references where appropriate. For the Income Summary account, calculate and enter the Balance (Bal.) before posting the entry to close out the account.

Question

Date Accounts and Explanation Debit Credit
Dec. 31 Service Revenue 50,000
Income Summary
50,000
To close Revenue
Date Accounts and Explanation Debit Credit
Dec. 31 Income Summary 23,000
Retained Earnings
23,000
To close Income Summary
Date Accounts and Explanation Debit Credit
Dec. 31 Retained Earnings 24,000
Dividends
24,000
To close Dividends
Date Accounts and Explanation Debit Credit
Dec. 31 Income Summary 27,000
Depreciation Expense--Furniture
4,000
Interest Expense
6,000
Rent Expense
2,000
Salaries Expense
5,000
Supplies Expense
10,000
To close Expenses

Answer 1

To post the closing entries and calculate ending balances in T-accounts, we'll first summarize the provided information in T-account format. Below are the T-accounts that reflect the closing entries.

T-Accounts

Service Revenue

          Service Revenue
--------------------------------
  Date       Debit        Credit
--------------------------------
  [Bal]                     50,000
  Dec. 31                  50,000  Post Ref: C1  
--------------------------------
Ending Balance:                 0

Income Summary

          Income Summary
--------------------------------
  Date       Debit        Credit
--------------------------------
  [Bal]                   23,000
  Dec. 31       50,000    50,000  Post Ref: C1  
  Dec. 31       23,000            Post Ref: C2  
  Dec. 31       27,000            Post Ref: C4   
--------------------------------
Ending Balance:                 0

Retained Earnings

          Retained Earnings
--------------------------------
  Date       Debit        Credit
--------------------------------
  [Bal]                     0
  Dec. 31                  23,000   Post Ref: C2
  Dec. 31                  24,000   Post Ref: C3
--------------------------------
Ending Balance:                0

Depreciation Expense -- Furniture

        Depreciation Expense - Furniture
-----------------------------------------
  Date       Debit        Credit
-----------------------------------------
  [Bal]                    0
  Dec. 31          4,000                 
-----------------------------------------
Ending Balance:              0

Interest Expense

          Interest Expense
--------------------------------
  Date       Debit        Credit
--------------------------------
   [Bal]                     0
  Dec. 31          6,000                 
--------------------------------
Ending Balance:                0

Rent Expense

           Rent Expense
--------------------------------
  Date       Debit        Credit
--------------------------------
   [Bal]                     0
  Dec. 31          2,000                 
--------------------------------
Ending Balance:                0

Salaries Expense

        Salaries Expense
--------------------------------
  Date       Debit        Credit
--------------------------------
   [Bal]                     0
  Dec. 31          5,000                 
--------------------------------
Ending Balance:                0

Supplies Expense

         Supplies Expense
--------------------------------
  Date       Debit        Credit
--------------------------------
   [Bal]                     0
  Dec. 31         10,000                 
--------------------------------
Ending Balance:              0

Dividends

          Dividends
--------------------------------
  Date       Debit        Credit
--------------------------------
   [Bal]                     0
  Dec. 31        24,000               
--------------------------------
Ending Balance:                0

Summary of Balances

Given the above T-accounts, the closing entries have affected the balances as follows:

• Service Revenue: Closed to Income Summary, balance now 0.
• Income Summary: After all closing entries, balance now 0.
• Retained Earnings: Has a net increase of (23,000 - 24,000) = -1,000 in this period, balance now 0.
• All expenses and dividends have been closed out to the respective accounts, leading to zero balances for each.

Conclusion

Each closing entry has successfully brought the temporary accounts (revenues, expenses, and dividends) to a zero balance, while their effects have been passed on to the Retained Earnings account, completing the closing process for this period.