Question

Presented below is income statement information of the Schefter Corporation for the year ended December 31, 2013.

Sales revenue $ 492,000
Salaries expense 80,000
Interest revenue 6,000
Advertising expense 10,000
Gain on sale of investments 8,000
Cost of goods sold 284,000
Insurance expense 12,000
Interest expense 4,000
Income tax expense 30,000
Depreciation expense 20,000


Required:
Prepare the necessary closing entries at December 31, 2013
Record the closure of revenue accounts.
Record the closure of expense accounts.
Record the transfer of the net profit.

Answer 1

Answer and Explanation:

The journal entries are shown below:

Sales Revenue $492,000

Interest Revenue $6,000

Gains on Sale of Investment $8,000

To Profit or Loss $506.000

(being the closing of revenue accounts is recorded)

Profit or Loss $440,000

To Salaries Expense $80,000

To Advertising Expense $10,000

To Cost of Goods Sold $284,000

To Insurance Expense $12,000

To Interest Expense $4,000

To Income Tax Expense $30,000

To Depreciation Expense $20,000

(being the closing of expenses accounts is recorded)

Net Income $66,000 ($506,000 - $440,000)

To Profit or Loss $66,000

(being Recording of profit earned)