Question

The ledger of Ivanhoe Company contains the following balances: Owner’s Capital $31,500, Owner’s Drawings $2,800, Service Revenue $49,000, Salaries and Wages Expense $27,600, and Supplies Expense $6,800.

Prepare the closing entries at December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date Account Titles and Explanation Debit Credit
Dec. 31

(To close revenue account)
Dec. 31


(To close expense accounts)
Dec. 31

(To close net income/ (loss))
Dec. 31

(To close drawings)

Answer 1

These entries transfer the revenue, expenses, and drawings to the Owner's Capital account, helping prepare the accounts for the next accounting period.

Here are the closing entries for Ivanhoe Company:

1. Close Revenue Accounts:

Debit: Service Revenue $49,000

Credit: Owner's Capital $49,000

2. Close Expense Accounts:

Debit: Salaries and Wages Expense $27,600

Debit: Supplies Expense $6,800

Credit: Service Revenue $34,400

3. Close Net Income/(Loss) to Owner's Capital:

Debit: Salaries and Wages Expense $27,600

Debit: Supplies Expense $6,800

Credit: Owner's Capital $34,400

4. Close Owner's Drawings:

Debit: Owner's Drawings $2,800

Credit: Owner's Capital $2,800

Therefore, The closing process by transferring revenue, expenses, and drawings to the Owner's Capital account. This process helps in preparing the accounts for the next accounting period.

Answer 2

The closing entries to these ledgers are:

Dec. 31 Service Revenue $49,000

Owner's Capital $49,000

Dec. 31 Salaries and Wages Expense $27,600

Supplies Expense $6,800

Owner's Capital $34,400

Dec. 31 Owner's Drawings $2,800

Owner's Capital $2,800

The journal preparation to these transactions are as follows:

1. Service Revenue is debited and Owner's Capital is credited for $49,000.

Dec. 31

Service Revenue $49,000

Owner's Capital $49,000

2. Salaries and Wages Expense and Supplies Expense are debited, while Service Revenue is credited for $34,400.

Dec. 31

Salaries and Wages Expense $27,600

Supplies Expense $6,800

Service Revenue $34,400

3. Owner's Capital is debited, and Owner's Drawings, Salaries and Wages Expense, and Supplies Expense are debited for $27,600 and $6,800.

Dec. 31

Salaries and Wages Expense $27,600

Supplies Expense $6,800

Owner's Capital $34,400

4. Owner's Drawings is debited, and Owner's Capital is credited for $2,800.

Dec. 31

Owner's Drawings $2,800

Owner's Capital $2,800