E2-17 On December 31, 2007, Bert’s Farm Store had the followingaccount balances
ID: 2458234 • Letter: E
Question
E2-17
On December 31, 2007, Bert’s Farm Store had the followingaccount balances in its accounting system. All year-endadjustments had been entered, but the books had not yet beenclosed.
Accounts
Balances
Account
Balances
Cash
700
Sales Revenue
2,200
Merchandise
2,800
Cost of Goods Sold
900
Supplies
925
Wages Expense
400
Prepaid Insurance
450
Utilities Expense
150
Equipment
3,550
Depreciation Expense.
50
Accumulated Depreciation
1,750
Insurance Expense.
100
Interest Payable
150
Supplies Expense
150
Notes Payable
2,000
Interest Expense
100
Owners Equity
4,175
A. What is the purpose of closing the books?
B. Prepare all necessary closing entries.
C. After closing, what is the amount of owner’sequity that will be reported on the balance sheet?
Accounts
Balances
Account
Balances
Cash
700
Sales Revenue
2,200
Merchandise
2,800
Cost of Goods Sold
900
Supplies
925
Wages Expense
400
Prepaid Insurance
450
Utilities Expense
150
Equipment
3,550
Depreciation Expense.
50
Accumulated Depreciation
1,750
Insurance Expense.
100
Interest Payable
150
Supplies Expense
150
Notes Payable
2,000
Interest Expense
100
Owners Equity
4,175
Explanation / Answer
a) the purpose of closing books is that at the end of everyaccounting period , the balances in temporary accounts aretransferred to an income summary account, thereby resetting thebalance of the temporary accounts to zero to begin the nextaccounting period. b) Closing Entries Date Accounts Debit Credit Dec31 Revenue 2200 IncomeSummary 2200 31 IncomeSummary 1850 Costof Goodssold 900 WagesExpense 400 UtilitiesExpense 150 DepreciationExpense 50 InsuranceExpense 100 SuppliesExpense 150 InterestExpense 100 31 IncomeSummary 350 RetainedEarnings 350 c) the income reported on the balance sheet will be $350Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.