S & X Co. is a retail store owned by Paul Tuner. During themonth of November, th
ID: 2370512 • Letter: S
Question
S & X Co. is a retail store owned by Paul Tuner. During themonth of November, the equity accounts were affected by thefollowing events:Nov.9 Turner invested an additional $15,000 in the business.
Nov.15 Tuner withdrew $1,500 for his salary for the first two weeksof the month.
Nov.30 Turner withdrew $1,500 for his salary for the second twoweeks of the month.
Nov.30 S&X distributed $1,000 or earnings to Turner.
INSTRUCTIONS:
a.Assuming that the business is organized as a soleproprietorship:
1.Prepare the journal entries to record the above events in theaccounts of S & X.
2.Prepare the closing entries for the month of November. Assumethat after closing all of the revenue and expense accounts, theIncome Summary account has a balance of $5,000.
Hint: Record the investment in a separate capital account and thewithdrawals (salary) in a separate drawing account. Close thedrawing account into the capital account as apart of the closingentries.
b. Assuming that the business is organized as a corporation:
3.Prepare the journal entries to record above events in theaccounts of S & X. . Assume that distribution of earnings onNovember 30 was payment of a dividend that was declared on November20.
4. Prepare the closing entries for the month of November. Assumethat after closing all of the revenue and expense accounts (exceptIncome Tax Expense) the Income Summary account has a balanceof$2000. Before preparing the closing entries, prepare the entriesto accrue income tax expense for the month and to close Income TaxExpense account to the Income Summary account. Assume that thecorporate income tax rate is at 30%.
c. Explain the causes of the differences in the net income betweenS&X as a sole proprietorship and S&X as a corporation.
d. Describe the effects of the business operations on Turnersindividual income tax return, assuming that the business isorganized as 1)a sole proprietorship and 2) a corporation.
So far I have the following for question a. 1. and 2. Could youplease tell me if this is correct?
1 Journal Entries
9-Nov Cash 15,000
Paul Turner, Capital 15,000
15-Nov Paul Turner, Withdrawal 1,500
Cash 1,500
30-Nov Paul Turner, Withdrawal 1,500
Cash 1,500
30-Nov Paul Turner, Withdrawal 1,500
Cash 1,500
2 Closing Entries
30-Nov Income Summary 5,000
Paul Turner, Capital 5,000
Paul Turner, Capital 4,500
Paul Turner, Withdrawal 4,500
Also, could you please help me to answer b. and possibly c. and d.too?
Explanation / Answer
What you did was correct for parts 1 and 2.
b. Assuming that the business is organized as a corporation:
3.Prepare the journal entries to record these events in the accounts of S & X:
Nov.9 Turner invested an additional $15,000 in the business.
Dr Cash $15,000
CrCommon stock $15,000
Nov.15 Tuner withdrew $1,500 for his salary for the first two weeks of the month.
Dr Salary expense$1,500
Cr Cash $1,500
Dividend was declared on November 20
Dr Dividend $1,000
Cr Dividend payable $1,000
Nov.30 Turner withdrew $1,500 for his salary for the second two weeks of the month.
Dr Salary expense $1,500
Cr Cash $1,500
Nov.30 S&X distributed $1,000 of earnings to Turner. Assume that distribution of earnings on November 30 was payment of a dividend that was declared on November 20.
Dr Dividend payable $1,000
Cr Cash $1,000
4. Prepare the closing entries for the month of November.
Dr Income Summary $3,000
Cr Salaries expense $3,000
Dr Retained earnings $1,000
Cr Dividend $1,000
Assume that after closing all of the revenue and expense accounts (exceptIncome Tax Expense) the Income Summary account has a balance of $2000. Before preparing the closing entries, prepare the entries to accrue income tax expense for the month and to close Income Tax Expense account to the Income Summary account. Assume that the corporate income tax rate is at 30%.
Dr Income taxes expense $600
Cr Income tax payable $600
Dr Income Summary $600
Cr Income taxes expense $600
Dr Income Summary $1,400
Cr Retained earnings $1,400
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