Question

Brief Exercise 3-36 (Algorithmic) Preparing and Analyzing Closing Entries At December 31, 2019, the ledger of Aulani Company includes the following accounts, all having normal balances: Sales Revenue, $83,200; Cost of Goods Sold, $43,700; Retained Earnings, $20,000; Interest Expense, $3,200; Dividends, $5,000; Wages Expense, $8,000, and Interest Payable, $2,100. Required: 1. Prepare the closing entries for Aulani at December 31, 2019. If an amount box does not require an entry, leave it blank. Dec. 31 (Close revenues) Dec. 31 (Close expenses) Dec. 31 (Close Income Summary) Dec. 31 (Close Dividends) 2. How does the closing process affect Aulani's retained earnings? of $

Answer 1

Answer and Explanation:

1. The Closing entries are shown below:-

a. Sales revenue Dr, $83,200

To Income summary $83,200

(Being Close revenue is recorded)

b. Income summary Dr, $54,900

To Cost of goods sold $43,700

To Interest expense $3,200

To Wages expense $8,000

(Being Close expense is recorded)

c. Income summary Dr, $28,300 (83,200 - $54,900)

To Retained earnings $28,300

(Being close income summary is recorded)

d. Retained earnings Dr, $5,000

To Dividend $5,000

(Being Close dividend is recorded)

2. The amount affect after retained earning by

Net income = $28,300 - $5,000

= $23,300