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18. Year End Closing & Account Classification

in Chapter 3 (Problem 18 of 18)

The following accounts reflect the correct Year 1 year-end balances after adjustment but before closing.


Accumulated depreciation 225 Accounts payable 52
Accounts receivable 280 Cash 76
Common stock 100 Cost of goods sold 420
Depreciation expense 60 Dividends 20
Equipment 600 Interest expense 4
Inventory 90 Note payable, due 8/1/Y4 63
Prepaid rent 10 Rent expense 40
Retained earnings, 1/1/Y1 400 Salary expense 125
Sales revenue 855 Unearned revenue 30
  1. Determine total assets
  2. Determine total liabilities
  3. What are retained earnings on the Dec. 31, Year 1 balance sheet?
  4. Prepare the correct entry to close the Income Summary accounts.
Watch Solution (6:50) Hide Solution Reveal Solution
1. Total assets - 831
2. Total liabilities - 145
3. What are retained earnings on the Dec. 31, Year 1 balance sheet? - 586

4. Closing the Income Summary Accounts:

Step 1: Close revenue and expenses to Income Summary

Income Summary
Depreciation Expense 60
855 Sales Revenue
COGS 420
Interest Expense 4
Rent 40
Salary Expense 125
206 Net Income

Step 2: Close Income Summary and Dividends to RE

Retained Earnings
400 Opening Balance
206 Income Summary
Dividends 20
586 Ending Balance

The Rest Of The Practice Problems

Click Here to View All Chapter 3 Problems at Once View
1 Adjusting Entry Identification Easy
2 Revenue Recognition Easy
3 Closing Journal Accounts Easy
4 Revenue Recognition Easy
5 Revenue Journal Entry Easy
6 Adjusting Entry - Salaries Payable Moderate
7 Adjusting Entry - Wage Expense Moderate
8 Revenue Recognition Moderate
9 Prepaid Rent Moderate
10 Determining Net Income From Transactions Moderate
11 Determining Net Income From Journal Entries Moderate
12 Closing Process Moderate
13 Adjusting Journal Entries Hard
14 Adjusting Journal Entries Hard
15 Revenue and Expense Recognition Hard
16 The Effect of Transactions Hard
17 When You Forget to do Adjusting Entries Hard
18 Year End Closing & Account Classification
You are here. 		Hard
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Chapter 3 Videos

1 Cash vs. Accrual Accounting 7:21
2 Expense Recognition 8:07
3 Accruals and Deferrals 15:07
4 What is an Adjusting Entry? 4:11
5 Adjusting Entry: Supplies 1:54
6 Adjusting Entry: Wages 4:52
7 Adjusting Entry: Unearned Revenue 2:11
8 Adjusting Entry: Interest 2:03
9 Contra-accounts 4:40
10 Depreciation 7:10
11 The Closing Process 10:37
Chapter 4 →