appendix
F
Accounting for
Sole Proprietorships
study objectives
After studying this appendix, you should be able to:
1 Identify the differences in equity accounts between a
corporation and a sole proprietorship.
3 Describe the differences between a retained earnings
statement and an owner’s equity statement.
2 Understand what accounts increase and decrease
owner’s equity.
4 Explain the process of closing the books for a sole
proprietorship.
Chapter 1 identified three forms of business organization. Two forms, the sole
proprietorship and the partnership, were discussed only briefly. Emphasis was
placed on the corporate form in Chapter 1 as well as in subsequent chapters.
The purpose of this appendix is to discuss and illustrate the accounting for
the operations and financial condition of a sole proprietorship. The primary
difference between accounting and reporting for a sole proprietorship and
a corporation involves accounting for equity transactions. Because a sole
proprietorship has a single owner rather than numerous stockholders, a sole
proprietorship uses a permanent owner’s capital account, such as “Sally Jones,
Capital,” instead of Common Stock and Retained Earnings. In a sole proprietorship there is no need to separate owner’s investments from net income retained
for dividends because the sole proprietor does not declare or receive dividends.
Instead, withdrawals by the owner of cash or other assets from the business for
personal use are recorded in a temporary drawing account. The different equity
accounts are contrasted as shown in Illustration F-1.
Corporation
Sole Proprietorship
Stockholders’ equity
Common stock
Retained earnings
Owner’s equity
Owner’s name, capital
For purposes of comparing the accounting for a corporation with a sole proprietorship, the illustrations in this Appendix F assume a sole proprietorship
owned by R. Neal and named Sierra Company. Except for equity transactions,
we use the same accounts, amounts, and transactions as those of Sierra
Corporation presented in Chapters 1 through 4.
F-1
study objective
1
Identify the differences in
equity accounts between
a corporation and a sole
proprietorship.
Illustration F-1
Equity section of the
balance sheet—corporation
vs. proprietorship
F-2
appendix F Accounting for Sole Proprietorships
Owner’s Equity in
a Sole Proprietorship
study objective
2
Understand what accounts
increase and decrease
owner’s equity.
The ownership claim on total assets is known as owner’s equity. It is equal to
total assets minus total liabilities.
INCREASES IN OWNER’S EQUITY
In a proprietorship, owner’s equity is increased by owner’s investments and
revenues.
Investments by Owner
Investments by owner are the assets the owner puts into the business. These
investments increase owner’s equity.
Revenues
Revenues are the gross increase in owner’s equity resulting from business
activities entered into for the purpose of earning income.
DECREASES IN OWNER’S EQUITY
In a proprietorship, owner’s equity is decreased by owner’s drawings and expenses.
Drawings
An owner may withdraw cash or other assets for personal use. These withdrawals
could be recorded as a direct decrease of owner’s equity. However, it is generally considered preferable to use a separate classification called drawings to
determine the total withdrawals for each accounting period. Drawings decrease
owner’s equity.
Expenses
Expenses are the cost of assets consumed or services used in the process of
earning revenue. They are decreases in owner’s equity that result from operating the business.
In summary, owner’s equity is increased by an owner’s investments and by
revenues from business operations. In contrast, owner’s equity is decreased by
an owner’s withdrawals of assets and by expenses. These relationships are shown
in Illustration F-2. Net income results when revenues exceed expenses. A net
loss occurs when expenses exceed revenues.
Illustration F-2
Increases and decreases
in owner’s equity
INCREASES
DECREASES
Investments by owner
Withdrawals by owner
Owner's
Equity
Revenues
Expenses
Financial Statements for a Proprietorship
F-3
Recording Transactions
of a Proprietorship
Chapter 3 described the basic steps employed in the accounting process as follows:
Analyze transactions.
Record transactions in the journal.
Post journal entries to the general ledger.
Prepare a trial balance.
These same steps apply to all forms of business. Illustration 3-2 (page 104) presented the impact of Sierra’s transactions on its accounting equation. Illustration F-3 shows how the same transactions would have been recorded for a sole
proprietor. The only differences are related to the accounts used to record equity
transactions. Those differences are highlighted here in red.
Illustration F-3
Summary of transactions
Cash
Assets
ⴝ
Liabilities
ⴙ
Owner’s Equity
Prepaid
Office
Notes
Accounts
Unearned
R. Neal,
ⴙ Supplies ⴙ Insurance ⴙ Equipment ⴝ Payable ⴙ Payable ⴙ Revenue ⴙ Capital
(1) ⫹$10,000
(2) ⫹5,000
⫽
⫽
5,000
⫽
5,000
5,000
⫽
5,000
⫹
1,200
⫹
10,000
⫹10,000 Service Revenue
⫹
5,000
⫽
5,000
⫹
1,200
⫹
20,000
⫺900 Rent Expense
⫹
5,000
⫽
5,000
⫹
1,200
⫹
19,100
⫹
5,000
⫽
5,000
⫹
1,200
⫹
19,100
(3)
15,000
⫺5,000
10,000
⫹1,200
⫹
5,000
(4)
11,200
(5) ⫹10,000
⫹
(6)
21,200
⫺900
(7)
20,300
⫺600
⫹$5,000
⫹$600
⫹
19,700
600
⫹$1,200
⫹$2,500
(8)
⫹$10,000 Investment by owner
⫹$5,000
⫹
10,000
⫹
10,000
⫹$2,500
⫹
5,000
⫽
5,000 ⫹
2,500 ⫹
1,200
⫹
19,100
⫺500 Drawings
19,200 ⫹
⫺4,000
2,500 ⫹
600
⫹
5,000
⫽
5,000 ⫹
2,500 ⫹
1,200
⫹
(11)
18,600
⫺4,000 Salaries Expense
$15,200 ⫹
$2,500 ⫹
$600
⫹
$5,000
⫽
$5,000 ⫹
$2,500 ⫹
$1,200
⫹
$14,600
$23,300
⎧
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎨
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎩
2,500 ⫹
⫹
⎧
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎨
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎩
19,700 ⫹
⫺500
600
(10)
$23,300
Financial Statements
for a Proprietorship
Chapter 4 described accounting for adjusting entries. A sole proprietor makes the
same types of adjustments as a corporation. After recording and posting all of the
adjustments, an adjusted trial balance is prepared. Illustrations F-4 (page F-4)
and F-5 (page F-5) show how the adjusted trial balance is used to prepare a sole
proprietor’s financial statements.
The primary differences between these statements and those of a corporation (presented in Illustrations 4-23 and 4-24, page 179) relate to the way equity
is reported. A sole proprietor prepares an owner’s equity statement rather than
a retained earnings statement and uses different titles for the equity items shown
on the balance sheet.
study objective
3
Describe the differences
between a retained
earnings statement and an
owner’s equity statement.
F-4
appendix F Accounting for Sole Proprietorships
SIERRA COMPANY
Adjusted Trial Balance
October 31, 2010
Account
Debit
Cash
$15,200
Accounts Receivable
200
Advertising Supplies
1,000
Prepaid Insurance
550
Office Equipment
5,000
Accumulated Depreciation—
Office Equipment
Notes Payable
Accounts Payable
Interest Payable
Unearned Service Revenue
Salaries Payable
R. Neal, Capital
500
Drawing
Service Revenue
Salaries Expense
5,200
Advertising Supplies Expense 1,500
Rent Expense
900
Insurance Expense
50
Interest Expense
50
Depreciation Expense
40
$30,190
SIERRA COMPANY
Income Statement
For the Month Ended October 31, 2010
Credit
Revenues
Service Revenue
$
40
5,000
2,500
50
800
1,200
10,000
Expenses
Salaries expense
Advertising supplies expense
Rent expense
Insurance expense
Interest expense
Depreciation expense
$10,600
$5,200
1,500
900
50
50
40
Total expenses
7,740
Net income
$ 2,860
10,600
$30,190
SIERRA COMPANY
Owner’s Equity Statement
For the Month Ended October 31, 2010
R. Neal, Capital, October 1
Add: Investments by owner
R. Neal, Capital
Net income
$
–0–
10,000
10,000
2,860
12,860
Less: Drawings
R. Neal, Capital, October 31
500
$12,360
To balance sheet
Illustration F-4
Preparation of the income
statement and owner’s
equity statement from the
adjusted trial balance
Closing the Books
of a Proprietorship
study objective
Explain the process of
closing the books for a
sole proprietorship.
4
At the end of the accounting period, the temporary account balances are transferred to the permanent owner’s equity account, Owner’s Capital, through the
preparation of closing entries. Closing entries for a proprietorship formally recognize in the ledger the transfer of net income (or net loss) and owner’s drawing
to owner’s capital. The results of these entries are shown in the owner’s equity
statement.
Journalizing and posting closing entries is a required step in the
accounting cycle. (See Illustration 4-27 on page 182 for Sierra Corporation.)
In preparing closing entries for a proprietorship, each income statement
account could be closed directly to owner’s capital. However, to do so would
result in excessive detail in the permanent owner’s capital account. Instead, the
revenue and expense accounts are closed, in the same manner as for a corporation, to another temporary account, Income Summary. Only the net income or
net loss is transferred from this account to Owner’s Capital.
Closing the Books of a Proprietorship
SIERRA COMPANY
Balance Sheet
October 31, 2010
SIERRA COMPANY
Adjusted Trial Balance
October 31, 2010
Account
Debit
Cash
$15,200
Accounts Receivable
200
Advertising Supplies
1,000
Prepaid Insurance
550
Office Equipment
5,000
Accumulated Depreciation—
Office Equipment
Notes Payable
Accounts Payable
Interest Payable
Unearned Service Revenue
Salaries Payable
R. Neal, Capital
500
R. Neal, Drawing
Service Revenue
5,200
Salaries Expense
1,500
Advertising Supplies Expense
900
Rent Expense
50
Insurance Expense
50
Interest Expense
40
Depreciation Expense
$30,190
F-5
Credit
$
40
5,000
2,500
50
800
1,200
10,000
10,600
$30,190
Assets
Cash
Accounts receivable
Advertising supplies
Prepaid insurance
Office equipment
$5,000
Less: Accumulated depreciation
40
Total assets
$15,200
200
1,000
550
4,960
$21,910
Liabilities and Owner’s Equity
Liabilities
Notes payable
Accounts payable
Interest payable
Unearned revenue
Salaries payable
Total liabilities
Owner’s equity
R. Neal, Capital
Total liabilities and
owner’s equity
$ 5,000
2,500
50
800
1,200
9,550
12,360
$21,910
Capital Balance at Oct. 31
from Owner’s Equity
Statement in Illustration F-4
Illustration F-5
Preparation of the balance
sheet from the adjusted
trial balance
Closing entries for a proprietorship may be prepared directly from the adjusted balances in the ledger, from the income statement and balance sheet
columns of the work sheet, or from the income and owner’s equity statements.
Separate closing entries could be prepared for each nominal account, but the
following four entries accomplish the desired result more efficiently:
1. Debit each revenue account for its balance, and credit Income Summary for
total revenues.
2. Debit Income Summary for total expenses, and credit each expense account
for its balance.
3. Debit Income Summary and credit Owner’s Capital for the amount of net
income.
4. Debit Owner’s Capital for the balance in the Owner’s Drawing account, and
credit Owner’s Drawing for the same amount.
The four entries are referenced in the diagram of the closing process shown in
Illustration F-6 and in the journal entries in Illustration F-7, both on page F-6.
The posting of closing entries is shown in Illustration F-8 (page F-7).
If there were a net loss because expenses exceeded revenues, entry 3 in
Illustration F-6 would be reversed: Credit Income Summary and debit Owner’s
Capital.
Helpful Hint Owner’s Drawing is
closed directly to Capital and not
to Income Summary because
Owner’s Drawing is not an
expense.
(Individual)
Expenses
(Individual)
Revenues
1
2
Income
Summary
3
Owner’s
Capital
Owner’s Capital is a
permanent account;
all other accounts are
temporary accounts.
4
Key:
1 Close Revenues to Income Summary.
2 Close Expenses to Income Summary.
3 Close Income Summary to Owner’s Capital.
4 Close Owner’s Drawing to Owner’s Capital.
Illustration F-6
Diagram of closing process
Owner’s
Drawing
GENERAL JOURNAL
Date
Account Titles and Explanation
Debit
Credit
Closing Entries
2010
Oct. 31
31
Illustration F-7
Closing entries journalized
Helpful Hint Income Summary
is a very descriptive title: Total
revenues are closed to Income
Summary, total expenses are
closed to Income Summary, and
the balance in the Income
Summary is a net income or
net loss.
F-6
31
31
(1)
Service Revenue
Income Summary
(To close revenue account)
(2)
Income Summary
Salaries Expense
Advertising Supplies Expense
Rent Expense
Insurance Expense
Interest Expense
Depreciation Expense
(To close expense accounts)
(3)
Income Summary
R. Neal, Capital
(To close net income to owner’s capital)
(4)
R. Neal, Capital
R. Neal, Drawing
(To close drawings to owner’s capital)
10,600
10,600
7,740
5,200
1,500
900
50
50
40
2,860
2,860
500
500
Summary of Study Objectives
Advertising
Supplies Expense
1,500
(2)
Depreciation
Expense
40
(2)
F-7
Service
Revenue
631
(1)
1,500
2
10,600
10,000
400
200
10,600
10,600
1
711
40
Income
Summary
Insurance
Expense
722
50
50
(2)
Salaries
Expense
4,000
1,200
(2)
5,200
(2)
7,740
2,860
(1)
10,600
10,600
10,600
3
726
5,200
R. Neal,
Capital
5,200
Rent
Expense
900
(2)
(3)
(4)
500
2
(3)
10,000
2,860
Bal.
12,360
729
900
4
Interest
Expense
905
50
50
(2)
R. Neal,
Drawing
500
(4)
500
Preparing a Post-Closing Trial
Balance for a Proprietorship
Illustration F-8
Posting of closing entries
After all closing entries are journalized and posted, the post-closing trial
balance is prepared from the ledger. A post-closing trial balance is a list of all
permanent accounts and their balances after closing entries are journalized and
posted. As with a corporation, the purpose of a proprietorship post-closing
trial balance is to prove the equality of the permanent account balances
that are carried forward into the next accounting period. Since all temporary
accounts will have zero balances, the post-closing trial balance will contain
only permanent—balance sheet—accounts.
Summary of Study Objectives
1
Identify the differences in equity accounts between a
corporation and a sole proprietorship. A sole proprietorship uses a permanent owner’s equity Capital
account instead of Common Stock and Retained Earn-
ings. Withdrawals of cash or other assets by the owner
for personal use are recorded in a temporary Drawing account.
F-8
appendix F Accounting for Sole Proprietorships
2
Understand what account transactions increase and
decrease owner’s equity. Investments by the owner
and revenue increase owner’s equity. Owner’s drawings and expenses decrease owner’s equity.
3
Describe the differences between a retained earnings
statement and an owner’s equity statement. A sole proprietor prepares an owner’s equity statement rather
than a retained earnings statement. The owner’s equity statement shows the beginning balance in the
owner’s capital account (instead of retained earnings,
as shown in the retained earnings statement), plus any
investments made by the owner, less any drawings (in
place of dividends, shown in the retained earnings
statement).
4
Explain the process of closing the books for a sole
proprietorship. In closing the books for a sole proprietorship, separate entries are made to close revenues
and expenses to Income Summary, Income Summary
to Owner’s Capital, and Owner’s Drawing to Owner’s
Capital.
Glossary
Drawings (p. F-2) Withdrawal of cash or other assets
from a sole proprietorship for the personal use of the
owner.
Investments by owner (p. F-2) The assets put into the
business by a sole proprietor.
Owner’s equity (p. F-2) The ownership claim on the total assets of a sole proprietorship.
Owner’s equity statement (p. F-3) The financial statement prepared for a sole proprietorship to summarize the
changes in owner’s equity for a specific period of time.
Questions
1. What is the basic accounting equation for a sole
proprietorship?
cash revenues. Is this treatment appropriate? Why or
why not?
2. What are the differences in the equity accounts of a
sole proprietorship versus those of a corporation?
5. What are the steps in preparing an owner’s equity
statement?
3. What items affect owner’s equity, and in what direction?
6. Identify the account(s) debited and credited in each
of the required closing entries for a sole proprietorship, assuming the company has net income for the
year.
4. In February 2010, Joe Kirby invested an additional
$10,000 in his business, Kirby’s Pharmacy, which is
organized as a proprietorship. Kirby’s accountant,
Lance Jones, recorded this receipt as an increase in
Brief Exercises
Determine effect of
transactions on basic
accounting equation.
(SO 2)
Determine effect of
transactions on owner’s
equity.
(SO 2)
Indicate debit and credit
effects and normal balance.
(SO 2)
BEF-1 Presented below are three business transactions. On a sheet of paper, list the
letters (a), (b), (c) with columns for assets, liabilities, and owner’s equity. For each column, indicate whether the transactions increased (⫹), decreased (⫺), or had no effect
(NE) on assets, liabilities, and owner’s equity.
(a) Invested cash in the business.
(b) Withdrawal of cash by owner.
(c) Received cash from a customer who had previously been billed for services provided.
BEF-2 Presented below are three transactions. Mark each transaction as affecting
owner’s investment (I), owner’s drawing (D), revenue (R), expense (E), or not affecting
owner’s equity (NOE).
(a) Received cash for services performed
(b) Paid cash to purchase equipment
(c) Paid employee salaries
BEF-3 For each of the following accounts indicate the effects of (a) a debit and (b) a
credit on the accounts and (c) the normal balance of the account.
1. Accounts Payable.
4. Accounts Receivable.
2. Advertising Expense.
5. B. C. Jardine, Capital.
3. Service Revenue.
6. B. C. Jardine, Drawing.
Exercises
F-9
Exercises
EF-1 An analysis of the transactions made by Roberta Mendez & Co., a certified
public accounting firm, for the month of August is shown below. Each increase and decrease in owner’s equity is explained.
Accounts
Office
Accounts
ⴙ Receivable ⴙ Supplies ⴙ Equipment ⴝ Payable ⴙ
Cash
1. ⫹$12,000
2.
⫺2,000
3.
⫺750
4.
⫹2,600
5.
⫺1,500
6.
⫺2,000
7.
⫺650
8.
⫹450
9.
⫺2,900
10.
⫹$3,700
⫹$750
⫹$5,000
⫹$3,000
⫺1,500
⫺450
⫹500
Analyze transactions and
compute net income.
(SO 2)
Owner’s Equity
R. Mendez, Capital
⫹$12,000
Investment
⫹6,300
Service Revenue
⫺2,000
⫺650
Drawings
Rent Expense
⫺2,900
⫺500
Salaries Expense
Utilities Expense
Instructions
(a)
Describe each transaction that occurred for the month.
(b) Determine how much owner’s equity increased for the month.
(c) Compute the amount of net income for the month.
(b) Increase in O.E. $12,250
(c) Net income
$2,250
EF-2 Presented below is information related to the sole proprietorship of Mark Garland,
attorney.
Prepare an owner’s equity
statement.
(SO 3)
Legal service revenue—2010
Total expenses—2010
Assets, January 1, 2010
Liabilities, January 1, 2010
Assets, December 31, 2010
Liabilities, December 31, 2010
Drawings—2010
$360,000
211,000
85,000
62,000
168,000
70,000
?
Instructions
Prepare the 2010 owner’s equity statement for Mark Garland’s legal practice.
EF-3
The adjusted trial balance of Mozart Company at the end of its fiscal year is:
MOZART COMPANY
Adjusted Trial Balance
July 31, 2010
No.
Account Titles
Debits
101
112
157
167
201
208
301
306
404
429
711
720
732
Cash
Accounts Receivable
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Rent Revenue
W.A. Mozart, Capital
W.A. Mozart, Drawing
Commission Revenue
Rent Revenue
Depreciation Expense
Salaries Expense
Utilities Expense
$ 14,940
8,780
15,900
Capital, Dec. 31 $98,000
Prepare income statement,
owner’s equity statement,
and balance sheet.
(SO 1, 2, 3, 4)
Credits
$
5,400
4,220
1,800
45,200
14,000
65,100
6,500
4,000
55,700
14,900
$128,220
$128,220
Instructions
(a) Prepare an income statement and an owner’s equity statement for the year. Mozart
did not make any capital investments during the year.
(b) Prepare a classified balance sheet at July 31.
(a) Net loss
$3,000
(b) Total assets $34,220
F-10
appendix F Accounting for Sole Proprietorships
Problems
Prepare income statement,
owner’s equity statement,
and balance sheet.
(SO 1, 2, 3, 4)
PF-1 On May 1, Dennis Chambers started Skyline Flying School, a company that
provides flying lessons, by investing $45,000 cash in the business. Following are the assets and liabilities of the company on May 31, 2010, and the revenues and expenses for
the month of May.
Cash
Accounts Receivable
Equipment
Lesson Revenue
Advertising Expense
$ 6,500
7,200
64,000
8,600
500
Notes Payable
Rent Expense
Repair Expense
Fuel Expense
Insurance Expense
Accounts Payable
$30,000
1,200
400
2,500
400
800
Dennis Chambers made no additional investment in May, but he withdrew $1,700 in cash
for personal use.
(a) Net income
$ 3,600
Owner’s equity $46,900
Total assets $ 77,700
(b) Net income
$1,200
Owner’s equity $44,500
Prepare financial statements,
closing entries, and postclosing trial balance.
Instructions
(a) Prepare an income statement and owner’s equity statement for the month of May
and a balance sheet at May 31.
(b) Prepare an income statement and owner’s equity statement for May assuming that
the data above need to be adjusted for the following items: (1) $900 of revenue was
earned and billed but not collected at May 31, and (2) $3,300 of fuel expense was incurred but not paid.
PF-2 The adjusted trial balance columns of the work sheet for Shmi Skywalker Company are as follows.
(SO 1, 2, 3, 4)
SHMI SKYWALKER COMPANY
Adjusted Trial Balance
For the Year Ended December 31, 2010
Adjusted
Trial Balance
Account
No.
Account Titles
Dr.
101
112
126
130
151
152
200
201
212
230
301
306
400
610
631
711
722
726
905
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Office Equipment
Accumulated Depreciation—Office Equipment
Notes Payable
Accounts Payable
Salaries Payable
Interest Payable
S. Skywalker, Capital
S. Skywalker, Drawing
Service Revenue
Advertising Expense
Supplies Expense
Depreciation Expense
Insurance Expense
Salaries Expense
Interest Expense
20,800
15,400
2,300
4,800
44,000
Totals
(a) Net income
$13,300
Current assets $43,300
Current liabilities $22,000
Cr.
18,000
20,000
8,000
3,000
1,000
36,000
12,000
79,000
12,000
3,700
6,000
4,000
39,000
1,000
165,000
165,000
Instructions
(a) Prepare an income statement, owner’s equity statement, and a classified balance
sheet. $10,000 of the notes payable become due in 2011. S. Skywalker did not make
any additional investments in the business during 2010.
(b) Prepare the closing entries.
Problems
(c) Post the closing entries. Use the three-column form of account. Income summary is
No. 350.
(d) Prepare a post-closing trial balance.
PF-3 The adjusted trial balance columns of the work sheet for Boss Nass Company,
owned by Boss Nass, are as follows.
(d) Post-closing trial
balance
$87,300
Prepare financial statements,
closing entries, and postclosing trial balance.
(SO 1, 2, 3, 4)
BOSS NASS COMPANY
Adjusted Trial Balance
For the Year Ended December 31, 2010
Adjusted
Trial Balance
Account
No.
Account Titles
Dr.
101
112
126
130
151
152
200
201
212
230
301
306
400
610
631
711
722
726
905
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Office Equipment
Accumulated Depreciation—Office Equipment
Notes Payable
Accounts Payable
Salaries Payable
Interest Payable
Boss Nass, Capital
Boss Nass, Drawing
Service Revenue
Advertising Expense
Supplies Expense
Depreciation Expense
Insurance Expense
Salaries Expense
Interest Expense
13,600
15,400
1,500
2,800
34,000
Totals
Cr.
8,000
16,000
6,000
3,000
500
25,000
10,000
88,000
12,000
5,700
4,000
5,000
42,000
500
146,500
146,500
Instructions
(a) Prepare an income statement, owner’s equity statement, and a classified balance sheet
(Note: $10,000 of the notes payable become due in 2011.) Boss Nass did not make
any additional investments in the business during the year.
(b) Prepare the closing entries. Use J14 for the journal page.
(c) Post the closing entries. Use the three-column form of account. Income Summary is
No. 350.
(d) Prepare a post-closing trial balance.
F-11
(a) Net income
$18,800
Current assets $33,300
Current liabilities $19,500
(d) Post-closing trial
balance
$67,300