Question

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 $ 2 6 Account Titles Cash Accounts Receivable Supplies Land Equipment Accumulated Depreciation Software Accumulated Amortization Accounts Payable Notes Payable (short- term) Salaries and Wages Payable Interest Payable Income Tax Payable Common Stock Retained Earnings Service Revenue Salaries and Wages Expense Depreciation Expense Amortization Expense Income Tax Expense Interest Expense Supplies Expense Totals $106 $106
please help me set up the closing entry correctly

PS: it doesn't let me plug in the second column as an income summary.

Answer 1

Closing entries:

Transaction	General Journal	Debit	Credit
1	Service revenue	$180
	Retained earnings		$180
	[To close revenue accounts]
2	Retained earnings	$146
	Amortization expense		$5
	Supplies expense		$20
	Depreciation expense		$5
	Interest expense		$1
	Salaries and wages expense		$108
	Income tax expense		$7
	[To close expenses account]

Explanations:

Supplies:
Beginning	$13
Purchases	$19
Ending	($12)
Supplies expense	$20

Salaries and wages expense:
Paid	$95
Accrued	$13
Total	$108

Given that close revenues and expenses accounts to Retained earnings. Hence income summary account do not arise.

You can also use single closing entry as follows,

Transaction	General Journal	Debit	Credit
1	Service revenue	$180
	Amortization expense		$5
	Supplies expense		$20
	Depreciation expense		$5
	Interest expense		$1
	Salaries and wages expense		$108
	Income tax expense		$7
	Retained earnings		$34
	[To close revenue and expense accounts]