Question

On December 31, 2019, the Income Statement section of the worksheet for Capeletti Distributors contained the following information.

Income Statement Section Debit Credit
Income Summary $37,600 $40,900
Sales 249,500
Sales Returns and Allowances 3,400
Sales Discounts 2,400
Interest Income 120
Purchases 133,400
Freight In 1,700
Purchases Returns and Allowances 1,500
Purchases Discounts 1,430
Rent Expense 8,000
Utilities Expense 2,830
Telephone Expense 1,440
Salaries Expense 65,100
Payroll Taxes Expense 5,170
Supplies Expense 1,600
Depreciation Expense 2,000
Interest Expense 240
Totals $264,880 $293,450

Assume further that the owner of the firm is John Capeletti and that the John Capeletti, Drawing account had a balance of $25,700 on December 31, 2019.
Required:
Prepare the entries that should be made in the general journal to close the revenue, cost of goods sold, expense, and other temporary accounts.

Answer 1

Explanation:

The closing journal entries are as follows

1. Sales $249,500

  Interest Income $120

  Purchases Returns and Allowances $1,500

  Purchases Discounts $1,430

                   To Income Summary $252,550

(Being revenue account closed)

2. Income summary A/c Dr $227,280

               To Sales Returns and Allowances $3,400

               To Sales Discounts $2,400

               To Purchases $133,400

               To Freight In $1,700

               To Rent Expense $8,000

               To Utilities Expense $2,830

               To Telephone Expense $1,440

               To Salaries Expense $65,100

               To Payroll Taxes Expense $5,170

               To Supplies Expense $1,600

               To Depreciation Expense $2,000

               To Interest Expense $240

(Being expenses accounts are closed)

3. Income summary A/c Dr $28,570

                 To John Capeletti, Capital $28,570

(Being the net income is closed)

The calculation is shown below:

= $40,900 + $252,550 - $227,280 - $37,600

= $28,570

4. John Capeletti, Capital $25,700

                 To John Capeletti, Drawings $25,700

(Being drawing account is closed)