! ! ! ACCTG!215!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Autumn!2013!!1!The$Closing$Process$/ The!purpose!of!the!closing!process!is!to!close!out!all!temporary!accounts!(i.e.!income!statement!accounts!and!dividends)!into!retained!earnings!/ Steps!in!the!closing!process:!o Close!all!revenue!accounts!to!retained!ea rnings!o Close!all!expense!accounts!to!retained!earnings!o Account!for!any!dividends!declared!Players$in$the$Game$/ Firm!–!responsible!for!providing!the!financial!report s!/ Board!of!directors!–!group!of!individuals!who!represents!shareholders’!interests!/ Auditors!–!provides!an!independent!assessment!of!whether!the!statements!conform!to!GAAP!rules!/ Regulators!–!provides!legal!standards!for!various!steps!in!the!process!(e.g.,!FASB,!SEC,!PCAOB)!The!December!31,!2013,!adjusted!trial!balance!for!Crosby!Corporation!is!presented!below.!$Required:$1. Record!the!necessary!closing!entries!at!December!31,!2013.!2. Prepare!a!post/closing!trial!balance.!3. Prepare!an!income!statement!for!the!year!ended!December!31,!2013.!4. Prepare!a!classified!balance!sheet!as!of!December!31,!2013.!! ! ! ACCTG!215!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Autumn!2013!!2!Requirement 1 December 31, 2013 Debit Credit Service Revenue 400,000 Retained Earnings 400,000 (Close revenue accounts) Retained Earnings 349,000 Salaries Expense 300,000 Rent Expense 15,000 Depreciation Expense 30,000 Interest Expense 4,000 (Close expense accounts) Requirement 2 Post-Closing Trial Balance Account Title Debit Credit Cash $ 11,000 Accounts receivable 140,000 Prepaid rent 5,000 Office supplies 25,000 Equipment 300,000 Accumulated depreciation $125,000 Accounts payable 11,000 Salaries payable 10,000 Interest payable 4,000 Notes payable 30,000 Common stock 200,000 Retained earnings 101,000 Totals $481,000 $481,000 !! ! ! ACCTG!215!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Autumn!2013!!3!Requirement 3 Crosby Corporation Income Statement For the year ended December 31, 2013 Service revenue $400,000 Expenses: Salaries $300,000 Rent 15,000 Depreciation 30,000 Interest 4,000 Total expenses 349,000 Net income $ 51,000 Requirement 4 Crosby Corporation Balance Sheet December 31, 2013 Assets Liabilities Cash $ 11,000 Accounts payable $ 11,000 Accts. receivable 140,000 Salaries payable 10,000 Prepaid rent 5,000 Interest payable 4,000 Office supplies 25,000 Total current liabilities 25,000 Total current assets 181,000 Notes payable 30,000 Stockholders’ Equity Equipment 300,000 Common stock 200,000 Accum. depr. (125,000) Retained earnings 101,000 * Total stockholders’ equity 301,000 Total liabilities and stockholders’ equity $356,000 Total assets $356,000 * Retained earnings = beginning retained earnings + net income − dividends = $50,000 + $51,000 − $0 = $101,000