Question

What are the closing entries?

Presented below is income statement and dividend information of the Nebraska Corporation for the year ended December 31, 2021. Sales revenue Salaries expense Dividend revenue Miscellaneous expense Loss on sale of investments Dividends $824,000 107.000 4,700 29.090 9,700 22,000 Cost of goods sold Insurance expense Depreciation expense Administrative expense Rent expense $440,000 37,000 35,000 52,899 27,000 Required: Prepare the necessary closing entries at December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.)

Answer 1

Solution

Closing Entries
Date	Accounts and Explanations	Debit	Credit
Dec-31	Sales revenue	$   824,000.00
	Dividends revenue	$         4,700.00
	Retained earnings		$    828,700.00
	(Revenue accounts closed)
Dec-31	Retained earnings	$   736,700.00
	Salaries expense		$    107,000.00
	Miscellaneous expense		$       29,000.00
	Loss on sale of investment		$          9,700.00
	Cost of goods sold		$    440,000.00
	Insurance expense		$       37,000.00
	Depreciation expense		$       35,000.00
	Administrative expenses		$       52,000.00
	Rent expense		$       27,000.00
	(Expenses Accounts closed)
Dec-31	Retained earnings	$       22,000.00
	Dividends		$       22,000.00
	(To close Dividend account)

All revenue accounts have credit balance so in order to close them they are debited. All expense have debit balance so they are closed by a credit. Dividends are finally closed to retained earnings. The difference between revenue and expense is also closed to retained earnings.