The ledger of Blue Spruce Company contains the following balances: Retained Earnings $30,500, Dividends $2,500, Service Revenue $50,500, Salaries and Wages Expense $26,500, and Supplies Expense $7,000. The closing entries are as follows: (1) Close revenue accounts.
(2) Close expense accounts.
(3) Close net income/(loss).
(4) Close dividends.
Enter the balances in T-accounts, and post the closing entries.
Salaries and Wages Expense select an option Bal. enter a debit amount 26500 select an option enter a credit balance
Supplies Expense select an option enter a debit amount select an option Bal. enter a credit balance 7000
Service Revenue select an option (1) enter a debit balance 50500 select an option Bal. enter a credit amount 50500
Dividends select an option (4) enter a debit amount 2500 select an option Bal. enter a credit balance 2500
Income Summary select an option enter a debit amount 26500 select an option enter a credit amount 50500
select an option enter a debit balance 7000
select an option enter a credit balance 2500
Retained Earnings select an option enter a debit amount
select an option enter a credit amount
select an option enter a debit amount
select an option enter a credit amount
select an option enter a debit balance
select an option enter a credit balance

Blue Spruce Company

Closing Entries:

1. Close Revenue Accounts:

Debit Service Revenue $50,500

Credit Income Summary $50,500

To close the service revenue account to the income summary.

2. Close Expense Accounts:

Debit Income Summary $26,500

Credit Salaries and Wages Expense $26,500

To close the salaries and wages expense account to the income summary.

Debit Income Summary $7,000

Credit Supplies Expense $7,000

To close the supplies expense account to the income summary.

3. Close net Income/(Loss):

Debit Net Income $17,000

Credit Retained Earnings $17,000

To close the net income to retained earnings.

4. Close Dividends:

Debit Retained Earnings $2,500

Credit Dividends $2,500

To close the dividends account to retained earnings.

Explanation:

a) Data and Calculations:

Retained Earnings $30,500

Dividends $2,500

Service Revenue $50,500

Salaries and Wages Expense $26,500

Supplies Expense $7,000

Mini-Income Statement:

Service Revenue                                     $50,500

Salaries and Wages Expense $26,500

Supplies Expense                      $7,000   33,500

Net income for the year                          $17,000

b) The above entries close the temporary accounts to the income summary where the net income is determined for the year.  The net income and dividends are thereafter closed to the retained earnings, which is a permanent account that will appear in the balance sheet and the next accounting period.

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