Questions and Answers
- neyrodriguez0
- Mar 29
- 6 min read
Updated: Mar 30
if I have annual revenue of 203000, expenses of 112700 and paid dividends of 25200 during the current year. the retained earnings account before closing had a balance of 315000. the ending retained earnings balance after closing is?
Use the retained earnings formula:
Ending Retained Earnings = Beginning Retained Earnings + Net Income − Dividends
First compute net income:
Net Income = Revenue − Expenses
Net Income = 203,000 − 112,700 = 90,300
Now plug into the formula:
Ending RE = 315,000 + 90,300 − 25,200
Ending RE = 380,100
Final Answer: 380,100
Prior to recording adjusting entries, the Office Supplies account had a $365 debit balance. A physical count of the supplies showed $108 of unused supplies available. The required adjusting entry is:
You need to record the amount of supplies used during the period.
Beginning balance (before adjustment): 365
Ending supplies (unused): 108
Supplies used = 365 − 108 = 257
Adjusting entry:
Debit: Office Supplies Expense → 257
Credit: Office Supplies → 257
This reduces the asset to the correct remaining balance and records the expense used.
High Step Shoes had annual revenues of $203,000, expenses of $112,700, and paid dividends of $25,200 during the current year. The retained earnings account before closing had a balance of $315,000. The Net Income for the year is:
Net Income is calculated as:
Net Income = Revenues − Expenses
Revenues = 203,000
Expenses = 112,700
Net Income = 203,000 − 112,700 = 90,300
Final Answer: 90,300
The temporary account used only for the closing process that contains a credit for total revenues (and gains) and a debit for total expenses (and losses) is the:
The account described is the Income Summary account.
It’s used only during the closing process:
Credited for total revenues (and gains)
Debited for total expenses (and losses)
After that, its balance (net income or loss) is transferred to Retained Earnings.
The assets section of a classified balance sheet usually includes these subgroups:
Current Assets
Long-term Investments
Property, Plant, and Equipment (PP&E)
Intangible Assets
These categories organize assets based on liquidity and useful life.
On December 1, Oren Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year. The cash receipt was recorded as unearned revenue. The adjusting entry for the year ended December 31 would include:
The $3,600 covers 2 months (December and January).
Revenue earned in December = 3,600 ÷ 2 = 1,800
Adjusting entry on December 31:
Debit: Unearned Revenue → 1,800
Credit: Service Revenue → 1,800
Castillo Services paid K. Castillo, the sole shareholder of Castillo Services, $5,700 in dividends during the current year. The entry to close the dividends account at the end of the year is:
The Dividends account is closed to Retained Earnings at the end of the year.
Closing entry:
Debit: Retained Earnings → 5,700
Credit: Dividends → 5,700
This eliminates the Dividends account balance and reduces retained earnings.
If 2500 of this was paid say in march you:
Entry in March:
Debit: Dividends → 2,500
Credit: Cash → 2,500
This records the distribution to the owner and reduces cash.
Later, at year-end, that $2,500 is already part of the total $5,700 Dividends balance that gets closed to Retained Earnings.
Two main accounting principles used in the adjusting process are the cash recognition principle and full disclosure principle.
That statement is incorrect.
The two main accounting principles used in the adjusting process are:
Revenue Recognition Principle (not cash recognition)
Expense Recognition Principle (also called the matching principle)
These ensure that:
Revenues are recorded when earned, not when cash is received
Expenses are recorded when incurred, not when cash is paid
The full disclosure principle is important in accounting, but it is not one of the two primary principles used for adjusting entries.
The adjusted trial balance must be prepared before the adjusting entries are made.
That statement is incorrect.
The adjusted trial balance is prepared after the adjusting entries are made, not before.
Correct order:
Unadjusted trial balance
Adjusting entries
Adjusted trial balance
Financial statements
The adjusted trial balance reflects all updated account balances after adjustments.
During the closing process, Retained Earnings is closed to the Dividends account.
That statement is incorrect.
During the closing process:
The Dividends account is closed to Retained Earnings, not the other way around.
Correct relationship:
Debit Retained Earnings
Credit Dividends
Retained Earnings is a permanent account, so it is not closed — it is updated by closing temporary accounts (revenues, expenses, and dividends) into it.
An adjusting entry was made on year-end December 31 to accrue salary expense of $2,000. Assuming the company does not prepare reversing entries, which of the following entries would be prepared to record the $4,600 payment of salaries in January of the following year?
Since no reversing entry is made, the January payment must account for both:
The previously accrued salary (2,000 from December)
The current period salary (remaining portion)
Total paid in January = 4,600Already accrued = 2,000Current expense = 4,600 − 2,000 = 2,600
Entry in January:
Debit: Salaries Payable → 2,000
Debit: Salaries Expense → 2,600
Credit: Cash → 4,600
This clears the liability and records the current period expense correctly.
On January 1, a company purchased a five-year insurance policy for $3,500 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:
The policy lasts 5 years = 60 months, and the total cost is $3,500.
Annual insurance expense = 3,500 ÷ 5 = 700
At the end of the first year, 1 year has expired, so you recognize $700 as expense.
Adjusting entry:
Debit: Insurance Expense → 700
Credit: Prepaid Insurance → 700
This records the portion of insurance that has been used during the year.
On April 1, Garcia Publishing Company received $1,548 from Otisco, Incorporated for 36-month subscriptions to several different magazines. The company credited Unearned Revenue for the amount received and the subscriptions started immediately. Assuming adjustments are only made at year-end, What is the adjusting entry that should be recorded by Garcia Publishing Company on December 31 of the first year?
The $1,548 covers 36 months, so monthly revenue is:
1,548 ÷ 36 = 43 per month
From April 1 to December 31 = 9 months
Revenue earned = 43 × 9 = 387
Adjusting entry on December 31:
Debit: Unearned Revenue → 387
Credit: Service (or Subscription) Revenue → 387
This recognizes the portion of revenue earned during the year.
A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would:
If accrued wages of $28,000 were not recorded, the financial statements are affected as follows:
Expenses are understated (wages expense not recorded)
Net income is overstated
Liabilities are understated (wages payable missing)
Equity (Retained Earnings) is overstated
Summary: Expenses understated, net income overstated, liabilities understated, and equity overstated.
What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired amount per analysis of policies is $3,250?
You need to record the insurance used (expired) during the period.
Prepaid Insurance (before adjustment) = 7,750
Unexpired insurance = 3,250
Expired insurance = 7,750 − 3,250 = 4,500
Adjusting entry on December 31:
Debit: Insurance Expense → 4,500
Credit: Prepaid Insurance → 4,500
This reduces the prepaid asset to the correct remaining balance and records the expense incurred.
The following information is available for Brendon Company before closing the accounts. What will be the amount in the Income Summary account that should be closed to Retained earnings?
Retained earnings | $ 147,000 |
Dividends | 50,000 |
Services revenue | 245,000 |
Depreciation Expense—Equipment | 15,925 |
Wages expense | 93,100 |
Interest expense | 4,500 |
Insurance expense | 15,300 |
Rent expense | 31,850 |
The Income Summary account reflects net income, which is:
Net Income = Revenues − Expenses
Step 1: Total Revenues
Services Revenue = 245,000
Step 2: Total Expenses
Depreciation Expense = 15,925
Wages Expense = 93,100
Interest Expense = 4,500
Insurance Expense = 15,300
Rent Expense = 31,850
Total Expenses:= 15,925 + 93,100 + 4,500 + 15,300 + 31,850= 160,675
Step 3: Net Income (Income Summary balance)
= 245,000 − 160,675= 84,325
84,325 (credit balance in Income Summary, closed to Retained Earnings)
The following information is available from the adjusted trial balance of the Harris Vacation Rental Agency. After closing entries are posted, what will be the balance in the Retained earnings account?
Total revenues | $ 125,000 |
Total expenses | 60,000 |
Retained earnings | 80,000 |
Dividends | 15,000 |
To find ending Retained Earnings after closing:
Step 1: Calculate Net Income
Net Income = Revenues − Expenses
= 125,000 − 60,000 = 65,000
Step 2: Update Retained Earnings
Beginning Retained Earnings = 80,000
Add Net Income = +65,000
Subtract Dividends = −15,000
Ending Retained Earnings = 80,000 + 65,000 − 15,000 = 130,000
On September 1, Kennedy Company loaned $132,000, at 9% annual interest, to a customer. Interest and principal will be collected when the loan matures one year from the issue date. Assuming adjustments are only made at year-end, what is the adjusting entry for accruing interest that Kennedy would need to make on December 31, the calendar year-end?
We need to accrue interest from September 1 to December 31 = 4 months.
Step 1: Calculate annual interest
132,000 × 9% = 11,880 per year
Step 2: Calculate interest for 4 months
11,880 × (4/12) = 3,960
Adjusting Entry on December 31:
Debit: Interest Receivable → 3,960
Credit: Interest Revenue → 3,960
This records the interest earned but not yet received.
Comments