ACCT 201 Principles of Financial Accounting Practice Exam - Chapter 3 Reporting & Preparing Financial Statemens Dr. Fred Barbee Solution to Short-Problem #3

Short Problem #3

Following are selected accounts and their balances for a company after the adjustments as of May 31, the end of its fiscal year. (All accounts have normal balances).

Common Stock	$20,000
Retained Earnings	10,000
Dividends	6,000
Fees Earned	20,000
Salaries Expense	7,000
Insurance Expense	350
Utilities Expense	75
Supplies Expense	500
Supplies	400
Salaries Payable	300
Depreciation Expense	425

Prepare all necessary closing entries for this company.

Solution

     Close the Revenue Accounts

Fees Earned	20,000
Income Summary		20,000

     Close the Expense Accounts

Income Summary	8,350
Salaries Expense		7,000
Insurance Expense		350
Utilities Expense		75
Supplies Expense		500
Depreciation Expense		425

     Close the Income Summary Account

Income Summary	11,650
Retained Earnings		11,650

     Close the Dividends Account

Retained Earnings	6,000
Dividends		6,000