Question

The following financial information was taken from the books of Zone Health Club, a small spa and fitness club: Account Balances as of December 31, 2016 Accounts Receivable $28,200 Accounts Payable 7,910 Salaries Payable 11,700 Cash 42,500 Dividends 4,900 Operating Expense 2,880 Prepaid Rent 3,400 Rent Expense 7,000 Retained Earnings 1/1/2016 20,300 Salaries Expense 32,600 Service Revenue 80,500 Supplies 320 Supplies Expense 2,100 Common Stock 21,900 Unearned Revenue 6,510 Land 14,900Required:a. Prepare the journal entries necessary to close the temporary accounts at December 31, 2016, for Zone Health Club. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)b.What is the balance in the Retained Earnings account after the closing entries are posted?

Answer 1

Answer:

(a) The journal entries are as follows:

(i) Service revenue A/c Dr. $80,500

             To retained earnings          $80,500

(To record the service revenue)

(ii) Retained Earnings A/c Dr. $44,580

              To Operating Expenses          $2,880    

              To Rent expenses                   $7,000

              To Salaries expenses             $32,600

              To Supplies expenses            $2,100

(To record the expenses)

(iii) Retained earnings A/c Dr. $4,900

            To dividends                            $4,900

(To record the dividends)

(b) Balance in the Retained Earnings account after the closing entries are posted:

= Beginning Retained Earnings + Revenue - Expenses - Dividends

= $20,300 + $80,500 - $44,580 - $4,900

= $51,320