Using the information below, prepare Closing Entries and Post-Close Trial Balanc
ID: 2538245 • Letter: U
Question
Using the information below, prepare Closing Entries and Post-Close Trial Balance:
1. On January 1, 2020, Dreamland purchased land for $10,000 and a building for $90,000. The land was paid for with cash. The building was paid for with $5,000 cash and the remainder was financed with a 10-year notes payable.
2. Paid the accounts payable balance from 2019.
3. Purchase $500 of supplies on account.
4. Purchased 100 alarm systems (inventory) on account at a cost of $200 each.
5. Paid $6,000 of advertising expense during the year.
6. Sold 95 alarm systems for $400 each. All sales were on account. (Note - Be sure to compute cost of goods sold using the FIFO cost flow method.)
7. Paid $7,500 of utilities expense for the year.
8. Billed $65,000 of monitoring services on account for the year.
9. Replenished the petty cash fund on June 30. The fund had $25 cash remaining and receipts of $90 for yard mowing and $35 for postage.
10. After numerous attempts to collect from customers, the company wrote off $650 of uncollectible accounts receivable.
11. Collected $83,000 of accounts receivable during the year.
12. On July 1, 2020, issued $25,000 of 5 percent, five year bonds. The bonds were issued at 98.
13. On October 1, 2020, paid the note and interest owed to Trust Bank (See Beg. Balance in Notes Payable). (Note - Record Interest Expense for January-September)
14. Paid employees a total of $20,000 for salaries for the year. Federal income taxes withheld amounted to $2,200. The net amount of salaries was paid in cash. (Note - $20,000 is the gross salary amount and the actual amount paid in cash will be less due to the federal income taxes withheld. Ignore employer taxes.)
15. Paid the Federal Income Taxes withheld from salaries.
16. Paid the annual installment on the note used to finance the purchase of the building. The note had an interest rate of 5 percent and annual payments of $11,008.
17. Paid a dividend of $10,000 to the shareholders.
Adjustments:
18. There was $275 of supplies on hand at the end of the year.
19. Recognized the expired rent for the office building for the year.
20. Recognized the uncollectible accounts expense for the year using the allowance method. Dreamland estimates that 2 percent of sales on account will not be collected.
21. Recognized depreciation expense on the equipment. The equipment has a six-year life and a $2,500 salvage value. The company uses straight-line depreciation for the equipment. The equipment was purchased in 2018 and a full year of depreciation was taken in 2018 and in 2019. (Only record 2020 depreciation.)
22. Recognized depreciation expense on the service truck. The service truck has a five-year life and an $8,000 salvage value. The company uses double-declining-balance for the service truck. The truck was purchased in 2018 and a full year of depreciation was taken in 2018 and in 2019. (Only record 2020 depreciation.)
23. Recognized depreciation expense on the building. The building has a 40-year life and a $50,000 salvage value. The company uses straight-line depreciation for the building.
Dreamland Security Services Inc
Journal Entries for the year ending December 31, 2020
Transaction
Account Title
Debit
Credit
1
Land
10,000
Building
90,000
Cash
15,000
Notes Payable
85,000
2
Accounts Payable
12,500
Cash
12,500
3
Supplies
500
Accounts Payable
500
4
Inventory
20,000
Accounts Payable
20,000
5
Advertising Expense
6,000
Cash
6,000
6
Accounts Receivable
38,000
Sales
38,000
Cost of Goods Sold
18,460
Inventory
18,460
7
Utilities Expense
7,500
Cash
7,500
8
Accounts Receivable
65,000
Service Revenue
65,000
9
Mics Expense
125
Cash
125
10
Allowance for Doubtful Accounts
650
Accounts Receivable
650
11
Cash
83,000
Accounts Receivable
83,000
12
Cash
24,500
Discount on Bond Issue
500
Bonds Payable
25,000
13
Notes Payable
15,000
Interest Expense
900
Cash
15,900
14
Salary Expense
20,000
Federal Income Tax Payable
2,200
Cash
17,800
15
Federal Income Tax Payable
2,200
Cash
2,200
16
Notes Payable
6,758
Interest Expense
4,250
Cash
11,008
17
Dividend
10,000
Cash
10,000
18
Supplies Expense
575
Supplies
575
19
Rent Expense
5,400
Prepaid Rent
5,400
20
Bad Debt Expense
760
Allowance for Doubtful Accounts
760
21
Depreciation Expense
1,250
Accumulated Depreciation
1,250
22
Depreciation Expense
5,184
Accumulated Depreciation
5,184
23
Depreciation Expense
1,000
Accumulated Depreciation
1,000
Service Truck
Cost
36,000
Life
5 Years
Rate of Depreciation
40%
2018 Depreciation
14,400
Book Value for 2019
21,600
2019 Depreciation
8,640
Book Value for 2020
12,960
2020 Depreciation
5,184
Dreamland Securities Services, Inc.
Trial Balance
Account
Debit
Credit
Cash
84,392
Petty Cash
150
Accounts Receivable
37,850
Allowance for Doubtful Accounts
3,085
Supplies
275
Prepaid Rent
5,400
Inventory
6,400
Land
10,000
Equipment
10,000
Service Truck
36,000
Building
90,000
Accumulated Depreciation
32,750
Accounts Payable
20,500
Notes Payable
78,242
Bonds Payable
25,000
Discount on Bonds Payable
500
Common Stock
50,000
Retained Earnings
50,645
Monitoring Revenue
65,000
Alarm Sales
38,000
Cost of Goods Sold
18,460
Postage Expense
35
Yard Care Expense
90
Supplies Expense
575
Uncollectible Accounts Expense
2,060
Interest Expense
4,925
Rent Expense
5,400
Advertising Expense
6,000
Depreciation Expense
7,210
Utilities Expense
7,500
Salaries Expense
20,000
Dividends
10,000
Totals
363,222
363,222
Cash
Debit
Credit
Beginning Balance
74,925
Transaction #1
15,000
Transaction #2
12,500
Transaction #5
6,000
Transaction #7
7,500
Transaction #9
125
Transaction #11
83,000
Transaction #12
24,500
Transaction #13
15,900
Transaction #14
17,800
Transaction #15
2,200
Transaction #16
11,008
Transaction #17
10,000
Total
84,392
Dreamland Security Services Inc
Journal Entries for the year ending December 31, 2020
Transaction
Account Title
Debit
Credit
1
Land
10,000
Building
90,000
Cash
15,000
Notes Payable
85,000
2
Accounts Payable
12,500
Cash
12,500
3
Supplies
500
Accounts Payable
500
4
Inventory
20,000
Accounts Payable
20,000
5
Advertising Expense
6,000
Cash
6,000
6
Accounts Receivable
38,000
Sales
38,000
Cost of Goods Sold
18,460
Inventory
18,460
7
Utilities Expense
7,500
Cash
7,500
8
Accounts Receivable
65,000
Service Revenue
65,000
9
Mics Expense
125
Cash
125
10
Allowance for Doubtful Accounts
650
Accounts Receivable
650
11
Cash
83,000
Accounts Receivable
83,000
12
Cash
24,500
Discount on Bond Issue
500
Bonds Payable
25,000
13
Notes Payable
15,000
Interest Expense
900
Cash
15,900
14
Salary Expense
20,000
Federal Income Tax Payable
2,200
Cash
17,800
15
Federal Income Tax Payable
2,200
Cash
2,200
16
Notes Payable
6,758
Interest Expense
4,250
Cash
11,008
17
Dividend
10,000
Cash
10,000
18
Supplies Expense
575
Supplies
575
19
Rent Expense
5,400
Prepaid Rent
5,400
20
Bad Debt Expense
760
Allowance for Doubtful Accounts
760
21
Depreciation Expense
1,250
Accumulated Depreciation
1,250
22
Depreciation Expense
5,184
Accumulated Depreciation
5,184
23
Depreciation Expense
1,000
Accumulated Depreciation
1,000
Explanation / Answer
Answer
General Journal
Debit (in $)
Credit (in $)
Monitoring Revenue
65000
Alarm Sales
38000
Income Summary
103000
(Revenue accounts closed)
Income Summary
72255
Cost of Goods Sold
18460
Postage Expense
35
Yard Care Expense
90
Supplies Expense
575
Uncollectible Accounts Expense
2060
Interest Expense
4925
Rent Expense
5400
Advertising Expense
6000
Depreciation Expense
7210
Utilities Expense
7500
Salaries Expense
20000
(Expenses account closed)
Income Summary
30745
Retained Earnings
30745
(Net Income transferred)
Retained Earnings
10000
Dividends
10000
(Dividends account closed)
Dreamland Securities Services, Inc.
Before closing entries balances
Effect of Closing Entries
Post Closing Trail balance
Account
Debit
Credit
Debit
Credit
Debit
Credit
Cash
84392
84392
Petty Cash
150
150
Accounts Receivable
37850
37850
Allowance for Doubtful Accounts
3085
3085
Supplies
275
275
Prepaid Rent
5400
5400
Inventory
6400
6400
Land
10000
10000
Equipment
10000
10000
Service Truck
36000
36000
Building
90000
90000
Accumulated Depreciation
32750
32750
Accounts Payable
20500
20500
Notes Payable
78242
78242
Bonds Payable
25000
25000
Discount on Bonds Payable
500
500
Common Stock
50000
50000
Retained Earnings
50645
10000
30745
71390
Monitoring Revenue
65000
65000
Alarm Sales
38000
38000
Cost of Goods Sold
18460
18460
Postage Expense
35
35
Yard Care Expense
90
90
Supplies Expense
575
575
Uncollectible Accounts Expense
2060
2060
Interest Expense
4925
4925
Rent Expense
5400
5400
Advertising Expense
6000
6000
Depreciation Expense
7210
7210
Utilities Expense
7500
7500
Salaries Expense
20000
20000
Dividends
10000
10000
Totals
363222
363222
113000
113000
280967
280967
General Journal
Debit (in $)
Credit (in $)
Monitoring Revenue
65000
Alarm Sales
38000
Income Summary
103000
(Revenue accounts closed)
Income Summary
72255
Cost of Goods Sold
18460
Postage Expense
35
Yard Care Expense
90
Supplies Expense
575
Uncollectible Accounts Expense
2060
Interest Expense
4925
Rent Expense
5400
Advertising Expense
6000
Depreciation Expense
7210
Utilities Expense
7500
Salaries Expense
20000
(Expenses account closed)
Income Summary
30745
Retained Earnings
30745
(Net Income transferred)
Retained Earnings
10000
Dividends
10000
(Dividends account closed)
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