Question

Brief Exercise 3-11 Nash has year-end account balances of Sales Revenue $853,391, Interest Revenue $14,160, Cost of Goods Sold $512,223, Administrative Expenses $200,960, Income Tax Expense $33,082, and Dividends $20,096. Prepare the year-end closing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

Sales revenue 853,391 debit

Income summary 853,391 credit

-- to close revenues accounts --

Income Summary 746,265 debit

Cost of Goods Sold 512,223 credit

Admin expenses 200,960 credit

Income tax expenses 33,082 credit

-- to close expenses accounts --

Income Summary 20,096 debit

Dividends 20,096 credit

-- to close dividends accounts --

Income Summary 87,030 debit

Retained Earnings 87,030 credit

-- to close income summary against retained earnings --

Step-by-step explanation:

To close the accounting period we need to leave the temporary accounts with a balance of zero. Using the Income Summary account we close revenues, expenses and dividends.

Then, we calculate the balance of this account and trasnfer it to Retained earnings:

Income Summary

Debit Credit

853,391

746,265

20,096

Balance: 87,030