Question

Required information The following information applies to the questions displayed below) Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows the amounts are rounded to thousands of dollars to simplify): Debit Credit 54 11 Account Titles Cash Accounts Receivable Supplies Land Equipsent Accumulated Depreciation Software Accumulated Amortization Accounts Payable Notes Payable (short-ters) Salaries and Wages Payable Interest Payable Incone Tax Payable Common Stock Retained Earnings Service Revenue Salaries and Wages Expense Depreciation Expense Amortization Expense Income Tax Expense Interest Expense Supplies Expense Totals OOOOOO 592

Answer 1

Background: Only revenue, expense, and dividend accounts are closed—not asset, liability, Common Stock, or Retained Earnings accounts. The four basic steps in the closing process are:

• Closing the revenue accounts—transferring the credit balances in the revenue accounts to a clearing account called Income Summary.
• Closing the expense accounts—transferring the debit balances in the expense accounts to a clearing account called Income Summary.
• Closing the Income Summary account—transferring the balance of the Income Summary account to the Retained Earnings account.
• Closing the Dividends account—transferring the debit balance of the Dividends account to the Retained Earnings account.

1. Transactions and events in 2018 Journal entries:

a.	Cash Dr	$13
	Note Payable (short-term) Cr	$13
b.	Land Dr	$7
	Cash Cr	$7
c.	Cash Dr	$25
	Common Stock Cr	$25
d.	Software Dr	$12
	Cash Cr	$12
e.	Supplies Dr	$17
	Accounts payable Cr	$17
f.	Accounts Payable Dr	$14
	Cash Cr	$14
g.	Merely signing a contract does not by itself require a journal entry.
h.	Cash Dr	$119
	Accounts Receivable Dr	$39
	Service Revenue Cr	$158
i.	Salaries and wages expense Dr	$84
	Cash Cr	$84
j.	Cash Dr	$23
	Accounts Receivable Cr	$23
k.	Amortization expense Dr	$6
	Accumulated amortization Cr	$6
l.	Supplies expense Dr	$6
	Supplies Cr	$6
m.	Depreciation expense Dr	$7
	Accumulated Depreciation Cr	$7
n.	Interest expenses Dr	$2
	Interest payable Cr	$2
o.	Salaries and wages expense Dr	$12
	Salaries and Wages payable Cr	$12
p.	Income tax expense Dr	$9
	Income Tax payable Cr	$9

2. Identify all the temporary account (Nominal account) along with the nature of account balance:

Revenue Cr, Salaries and wages expense Dr, Amortization expense Dr, Supplies expense Dr, Depreciation expense Dr, Interest expenses Dr, Income tax expense Dr.

3. Closing entries:

1	Service Revenue Dr	$158
	Income Summary Cr	$158
2	Income Summary Dr	$126
	Salaries and wages expense Cr	$96
	Amortization expense Cr	$6
	Supplies expense Cr	$6
	Depreciation expense Cr	$7
	Interest expenses Cr	$2
	Income tax expense Cr	$9
3	Income Summary Dr	$32
	Retained Earnings Cr	$32

4. Post Trial balance after closing entries:

Account title	Debit	Credit	(All in $)
Cash	$67
Accounts receivable	20
Supplies	22
Land	7
Euipment	52
Accumulated Depreciation		7
Software	20
Accumulated amortization		6
Accounts payable		9
Note Payable (short-term)		$13
Salaries and Wages pyable		12
Interest payable		2
Income Tax payable		9
Common Stock		91
Retained Earnings		39
Service Revenue	0
Salaries and wages expense	0
Depreciation expense	0
Amortization expense	0
Income tax expense	0
Interest expenses	0
Supplies expense	0
Total	188	188	0