4. American Chip Corporation’s fiscal year-end is December 31. The following is

Question

4.

American Chip Corporation’s fiscal year-end is December 31. The following is a partial adjusted trial balance as of December 31, 2018.

Required:
Prepare the necessary closing entries at December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Account Title Debits Credits Retained earnings 94,000 Sales revenue 890,000 Interest revenue 4,500 Cost of goods sold 490,000 Salaries expense 130,000 Rent expense 29,000 Depreciation expense 44,000 Interest expense 6,400 Insurance expense 7,400

Explanation / Answer

Closing entries 1. Sales A/c Dr 890000 To P&L A/c 890000 (Being closing entry made for transferring sales account balance to P&l account) 2. Interest income A/c Dr 4500 To P&L A/c 4500 (Being closing entry made for transferring Interest income balance to P&l account) 3. P&L A/c Dr 490000 To Cost of goods sold 490000 (Being closing entry made for transferring cost of goods sold to P&l account) 4. P&L A/c Dr 216800 To Salaries A/c 130000 TO Rent A/c 29000 To Depreciation A/c 44000 To Interest exp A/c 6400 To insurance exp A/c 7400 ( Being expenses for the year transferred to P&l account as a closing entry) The difference between Revenues (894500) and expenses (706800) amounting to 187700/- will be transferred to retained earnings 5. Retained earnings A/c Dr 187700 To P&l A/c 187700 ( Being closing balance of P&l transferred to retained earnings) The total debits and credits in P&L is equal and will be closed i:e, it will have 'Zero(0)' balance at the end

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