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20. Year End Closing & Account Classification

in Chapter 3 (Problem 20 of 20)

The following accounts reflect the correct Year 1 year-end balances after adjustment but before closing.


Accumulated depreciation 225 Accounts payable 52
Accounts receivable 280 Cash 76
Common stock 100 Cost of goods sold 420
Depreciation expense 60 Dividends 20
Equipment 600 Interest expense 4
Inventory 90 Note payable, due 8/1/Y4 63
Prepaid rent 10 Rent expense 40
Retained earnings, 1/1/Y1 400 Salary expense 125
Sales revenue 855 Unearned revenue 30
  1. Determine total assets
  2. Determine total liabilities
  3. What are retained earnings on the Dec. 31, Year 1 balance sheet?
  4. Prepare the correct entry to close the Income Summary accounts.
Watch Solution (6:50) Hide Solution Reveal Solution
1. Total assets - 831
2. Total liabilities - 145
3. What are retained earnings on the Dec. 31, Year 1 balance sheet? - 586

4. Closing the Income Summary Accounts:

Step 1: Close revenue and expenses to Income Summary

Income Summary
Depreciation Expense 60
855 Sales Revenue
COGS 420
Interest Expense 4
Rent 40
Salary Expense 125
206 Net Income

Step 2: Close Income Summary and Dividends to RE

Retained Earnings
400 Opening Balance
206 Income Summary
Dividends 20
586 Ending Balance

The Rest Of The Practice Problems

Click Here to View All Chapter 3 Problems at Once View
1 Closing Journal Accounts Easy
2 Adjusting Entry Identification Easy
3 Current Assets Easy
4 Revenue Journal Entry Easy
5 Revenue Recognition Easy
6 Revenue Recognition Easy
7 Determining Net Income From Transactions Moderate
8 Revenue Recognition Moderate
9 Adjusting Entry - Wage Expense Moderate
10 Closing Process Moderate
11 Determining Net Income From Journal Entries Moderate
12 Adjusting Entry - Salaries Payable Moderate
13 Prepaid Rent Moderate
14 When You Forget to do Adjusting Entries Hard
15 The Effect of Transactions Hard
16 Account Classifications Hard
17 Revenue and Expense Recognition Hard
18 Adjusting Journal Entries Hard
19 Adjusting Journal Entries Hard
20 Year End Closing & Account Classification
You are here. 		Hard
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Chapter 3 Videos

1 Current Assets 9:57
2 Non-Current Assets 10:25
3 Current Liabilities 6:24
4 Non-Current Liabilites 2:00
5 The Classified Balance Sheet 4:48
6 Cash vs. Accrual Accounting 7:21
7 Expense Recognition 8:07
8 Accruals and Deferrals 15:07
9 What is an Adjusting Entry? 4:11
10 Adjusting Entry: Supplies 1:54
11 Adjusting Entry: Wages 4:52
12 Adjusting Entry: Unearned Revenue 2:11
13 Adjusting Entry: Interest 2:03
14 Contra-accounts 4:40
15 Depreciation 7:10
16 The Closing Process 10:37
Chapter 4 →