Financial Statements and Closing Entries The Gorman Group is a financial plannin

Question

Financial Statements and Closing Entries

The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2018, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:

Required:

1. Prepare an income statement.

Prepare a retained earnings statement.

Prepare a balance sheet.

2. Journalize the entries that were required to close the accounts at October 31. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If the balance of Retained Earnings had instead increased $115,000 after the closing entries were posted, and the dividends remained the same, what would have been the amount of net income or net loss? Enter all amounts as positive numbers.
$  

The Gorman Group
End-of-Period Spreadsheet
For the Year Ended October 31, 2018 Adjusted Trial Balance Account Title Dr. Cr. Cash $11,000 Accounts Receivable 28,150 Supplies 6,350 Prepaid Insurance 9,500 Land 75,000 Buildings 250,000 Accumulated Depreciation-Buildings 117,200 Equipment 240,000 Accumulated Depreciation-Equipment 151,700 Accounts Payable 33,300 Salaries Payable 3,300 Unearned Rent 1,500 Common Stock 25,000 Retained Earnings 195,000 Dividends 20,000 Service Fees 468,000 Rent Revenue 5,000 Salaries Expense 291,000 Depreciation Expense-Equipment 17,500 Rent Expense 15,500 Supplies Expense 9,000 Utilities Expense 8,500 Depreciation Expense-Buildings 6,600 Repairs Expense 3,450 Insurance Expense 3,000 Miscellaneous Expense 5,450 1,000,000 1,000,000

Explanation / Answer

Income Statement: revenues: Service fees 468000 Rent revenue 5000 Total revenue 473000 Expenses: Salaries expense 291000 Depreciation 17500 Rent expense 15500 Supplies 9000 Utilities expense 8500 Depreciation-Building 6600 Repairs expenses 3450 Insurance expenses 3000 Misc. expenses 5450 Total expenses 360000 Net income 113000 Statement of Retained earnings: Beginning balance of RE 195000 Add: Net income for the year 113000 308000 Less: Dividend 20000 Ending balance of RE 288000 Balance Sheet: Assets Liabilities: Current assets: Current Liabilities: Cash 11000 Accounts payable 33300 Accounts receivable 28150 Salaries payable 3300 Supplies 6350 Unearned rent 1500 Prepaid insurance 9500 Total Liabilities 38100 Total current assets: 55000 Property Plant and Equipment: Stockholder's equity: Land 75000 Common Stock 25000 Building 250000 Retained earnings 288000 Less: Accumulated dep 117200 132800 Total Stockholder's equity 313000 Equipment 240000 Less: Accumulated dep 151700 88300 Total Property, Plant and equipment 296100 Total Assets 351100 Total Liabilities and Stockholder's equity 351100 Closing entries: Accounts title and explanations Debit $ Credit $ Service fees Ddr. 468000 Rent revenue Dr. 5000     Income Summary 473000 Income Summary Dr. 360000     Salaries expense 291000     Depreciation-Equipment 17500     Rent expense 15500     Supplies expenses 9000     Utilities expenses 8500     Depreciation-Building 6600     Repairs expenses 3450     Insurance expenses 3000     Misc expenses 5450 Income Summary Dr. 113000     Retained earnings 113000 Retained earnings Dr. 20000      Dividend account 20000 Increase in Retained earnings balance 115000 Add: Dividend paid 20000 Net income earned during the year 135000

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