Question

The trial balance of Optique Boutique at December 21 shows Inventory $ 21,000, Sales Revenue S 156.000, Sales Returns and Allowances $4,000, Sales Discounts $3,000, Cost of Goods Sold $ 92.400, Interest Revenue $5.000, Freight-Out $1.500 Utilities Expense 57.400, and Salaries and Wages Expense $ 19,500

Prepare the closing entries for Optique Boutique for these accounts.

Answer 1

The closing entries for Optique Boutique involve debiting and crediting various accounts to close out the revenue, expenses, and inventory. The Income Summary account is used to transfer the totals to the Retained Earnings account. The final step is to close out the Income Summary account to the Retained Earnings account.

Step-by-step explanation:

The closing entries for Optique Boutique are as follows:

1. Close the Sales Revenue, Sales Returns and Allowances, and Sales Discounts accounts by debiting the balance and crediting the Income Summary account:
2. Sales Revenue debit: $156,000 Sales Returns and Allowances debit: $4,000 Sales Discounts debit: $3,000 Income Summary credit: $163,000
3. Close the Income Summary account by debiting the balance and crediting the Retained Earnings account:
4. Income Summary debit: $163,000 Retained Earnings credit: $163,000
5. Close the Cost of Goods Sold account by debiting the balance and crediting the Inventory account:
6. Cost of Goods Sold debit: $92,400 Inventory credit: $92,400
7. Close the Interest Revenue, Freight-Out, Utilities Expense, and Salaries and Wages Expense accounts by debiting the balance and crediting the Income Summary account:
8. Interest Revenue debit: $5,000 Freight-Out debit: $1,500 Utilities Expense debit: $57,400 Salaries and Wages Expense debit: $19,500 Income Summary credit: $83,400
9. Close the Income Summary account by debiting the balance and crediting the Retained Earnings account:
10. Income Summary debit: $83,400 Retained Earnings credit: $83,400