GERDES PSYCHOLOGICAL SERVICES, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER
ID: 2335735 • Letter: G
Question
GERDES PSYCHOLOGICAL SERVICES, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2011 Revenue: $225,000 Expenses: Advertising expense . . . . 1,800 1,200 850 2,650 4,500 6,000 Depreciation expense: fixtures . Income taxes expense 29,400 170,400 54,600 The firm's statement of retained earnings indicates that a $6.000 cash dividend was declared and paid during 2011. a. Prepare the necessary closing entries on December 31,2011. b. If the firm's Retained Earnings account had a $92,000 balance on January 1,2011, at what amount should Retained Earmings be reported in the firm's balance sheet dated December il 0?Explanation / Answer
Closing Entries
Date
Accounts and Explanations
Debit
Credit
12/31/2011
Counseling Revenue
$ 225,000.00
Income Summery
$ 225,000.00
(Revenue account transferred to income summery)
12/31/2011
Income Summery
$ 170,400.00
Advertising expense
$ 1,800.00
Salaries Expense
$ 94,000.00
Office Supplies expense
$ 1,200.00
Utilities expense
$ 850.00
Malpractice insurance expense
$ 6,000.00
Office rent expense
$ 24,000.00
Continuing Education expense
$ 2,650.00
Depreciation expense-Fixtures
$ 4,500.00
Miscellaneous Expense
$ 6,000.00
Income taxes expense
$ 29,400.00
(Expenses transferred)
12/31/2011
Income Summery
$ 54,600.00
Retained earnings
$ 54,600.00
(Retained earnings added during year in form of Income)
12/31/2011
Retained earnings
$ 6,000.00
Dividends
$ 6,000.00
(Dividends transferred to retained earnings account)
Requirement b
GERDES PSYCHOLOGICAL SERVICES ,INC.
Statement of Retained earnings
For the year ended December 31, 2011
Retained earnings ,January 31, 2011
$ 92,000.00
Add: income during the year
$ 54,600.00
Less: Dividends
$ (6,000.00)
Retained earnings , December 31, 2011
$ 140,600.00
Balance of retained earnings at December 31 = $ 14,0600
Closing Entries
Date
Accounts and Explanations
Debit
Credit
12/31/2011
Counseling Revenue
$ 225,000.00
Income Summery
$ 225,000.00
(Revenue account transferred to income summery)
12/31/2011
Income Summery
$ 170,400.00
Advertising expense
$ 1,800.00
Salaries Expense
$ 94,000.00
Office Supplies expense
$ 1,200.00
Utilities expense
$ 850.00
Malpractice insurance expense
$ 6,000.00
Office rent expense
$ 24,000.00
Continuing Education expense
$ 2,650.00
Depreciation expense-Fixtures
$ 4,500.00
Miscellaneous Expense
$ 6,000.00
Income taxes expense
$ 29,400.00
(Expenses transferred)
12/31/2011
Income Summery
$ 54,600.00
Retained earnings
$ 54,600.00
(Retained earnings added during year in form of Income)
12/31/2011
Retained earnings
$ 6,000.00
Dividends
$ 6,000.00
(Dividends transferred to retained earnings account)
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