ACCTG 215 Autumn 2013 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 earnings o Close all expense accounts to retained earnings o Account for any dividends declared Players in the Game Firm responsible for providing the financial reports 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 2 3 4 Record the necessary closing entries at December 31 2013 Prepare a post closing trial balance Prepare an income statement for the year ended December 31 2013 Prepare a classified balance sheet as of December 31 2013 1 ACCTG 215 Autumn 2013 Requirement 1 December 31 2013 Debit Credit Service Revenue Retained Earnings Close revenue accounts 400 000 Retained Earnings Salaries Expense Rent Expense Depreciation Expense Interest Expense Close expense accounts 349 000 400 000 300 000 15 000 30 000 4 000 Requirement 2 Post Closing Trial Balance Account Title Cash Accounts receivable Prepaid rent Office supplies Equipment Accumulated depreciation Accounts payable Salaries payable Interest payable Notes payable Common stock Retained earnings Totals Debit 11 000 140 000 5 000 25 000 300 000 481 000 Credit 125 000 11 000 10 000 4 000 30 000 200 000 101 000 481 000 2 ACCTG 215 Autumn 2013 Requirement 3 Crosby Corporation Income Statement For the year ended December 31 2013 Service revenue Expenses Salaries Rent Depreciation 400 000 300 000 15 000 30 000 Interest 4 000 Total expenses 349 000 Net income 51 000 Requirement 4 Crosby Corporation Balance Sheet December 31 2013 Assets Cash 11 000 Accts receivable 140 000 Prepaid rent 5 000 Office supplies 25 000 Total current assets 181 000 Equipment Accum depr Total assets 300 000 125 000 356 000 Liabilities Accounts payable 11 000 Salaries payable 10 000 Interest payable 4 000 Total current liabilities 25 000 Notes payable 30 000 Stockholders Equity Common stock 200 000 Retained earnings 101 000 Total stockholders equity 301 000 Total liabilities and stockholders equity 356 000 Retained earnings beginning retained earnings net income dividends 50 000 51 000 0 101 000 3
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