Question

the following unadjusted trial balance contains the accounts and balances of dylan delivery company as of december 31.

1. use the following information about the company’s adjustments to complete a 10 - column work sheet.

a. unrecorded depreciation on the trucks at the end of the year is $40,000.
b. total amount of accrued interest expense at year - end is $6,000.
c. cost of unused supplies still available at year - end is $2,000.

1. (a) prepare the year - end closing entries for this company. (b) determine the capital amount to be reported on its year - end balance sheet. note: the s. dylan, capital account balance was $307,000 on december 31 of the prior year.

unadjusted trial balance
account title debit credit
cash $ 16,000
accounts receivable 34,000
supplies 5,000
trucks 350,000
accumulated depreciation—trucks $ 80,000
land 160,000
accounts payable 24,000
interest payable 5,000
long - term notes payable 100,000
s. dylan, capital 307,000
s. dylan, withdrawals 34,000
delivery revenue 263,000
depreciation expense—trucks 40,000
salaries expense 110,000
supplies expense 15,000
interest expense 5,000
repairs expense 10,000
totals $779,000 $779,000

use the may 31 fiscal year - end information from the following ledger accounts (assume that all accounts have normal balances) to (a) prepare closing journal entries and (b) post those entries to ledger accounts.

general ledger
m. muncel, capital acct. no. 301
date pr debit credit balance
may 31 g2 40,000
m. muncel, withdrawals acct. no. 302
date pr debit credit balance
may 31 g2 22,000
services revenue acct. no. 403
date pr debit credit balance
may 31 g2 76,000
depreciation expense acct. no. 603
date pr debit credit balance
may 31 g2 15,000
salaries expense acct. no. 622
date pr debit credit balance
may 31 g2 20,000
insurance expense acct. no. 637
date pr debit credit balance
may 31 g2 4,400
rent expense acct. no. 640
date pr debit credit balance
may 31 g2 8,400
income summary acct. no. 901
date pr debit credit balance

Explanation:

Step1: Calculate net income for Dylan Delivery Company

Net income = Delivery revenue - (Depreciation expense—Trucks + Salaries expense + Supplies expense + Interest expense+ Repairs expense)
Net income = $263,000-(40,000 + 110,000+15,000 + 5,000+10,000)=$83,000

Step2: Prepare closing entries for Dylan Delivery Company

Closing entry 1: Close revenue account

Debit: Delivery revenue $263,000
Credit: Income Summary $263,000

Closing entry 2: Close expense accounts

Debit: Income Summary $180,000
Credit: Depreciation expense—Trucks $40,000
Credit: Salaries expense $110,000
Credit: Supplies expense $15,000
Credit: Interest expense $5,000
Credit: Repairs expense $10,000

Closing entry 3: Close Income Summary to Capital

Debit: Income Summary $83,000
Credit: S. Dylan, Capital $83,000

Closing entry 4: Close withdrawals to Capital

Debit: S. Dylan, Capital $34,000
Credit: S. Dylan, Withdrawals $34,000

Step3: Calculate capital amount for Dylan Delivery Company

Beginning capital = $307,000
Add net - income = $83,000
Less withdrawals = $34,000
Ending capital = $307,000 + 83,000-34,000=$356,000

Step4: Prepare closing entries for M. Muncel

Closing entry 1: Close revenue account

Debit: Services Revenue $76,000
Credit: Income Summary $76,000

Closing entry 2: Close expense accounts

Debit: Income Summary $47,800
Credit: Salaries Expense $20,000
Credit: Insurance Expense $4,400
Credit: Rent Expense $8,400
Credit: Depreciation Expense $15,000

Closing entry 3: Close Income Summary to Capital

Net income = $76,000 - 47,800=$28,200
Debit: Income Summary $28,200
Credit: M. Muncel, Capital $28,200

Closing entry 4: Close withdrawals to Capital

Debit: M. Muncel, Capital $22,000
Credit: M. Muncel, Withdrawals $22,000

Answer:

For Dylan Delivery Company:
Closing entries:

1. Debit: Delivery revenue $263,000; Credit: Income Summary $263,000
2. Debit: Income Summary $180,000; Credit: Depreciation expense—Trucks $40,000, Salaries expense $110,000, Supplies expense $15,000, Interest expense $5,000, Repairs expense $10,000
3. Debit: Income Summary $83,000; Credit: S. Dylan, Capital $83,000
4. Debit: S. Dylan, Capital $34,000; Credit: S. Dylan, Withdrawals $34,000

Capital amount to be reported on balance - sheet: $356,000
For M. Muncel:
Closing entries:

1. Debit: Services Revenue $76,000; Credit: Income Summary $76,000
2. Debit: Income Summary $47,800; Credit: Salaries Expense $20,000, Insurance Expense $4,400, Rent Expense $8,400, Depreciation Expense $15,000
3. Debit: Income Summary $28,200; Credit: M. Muncel, Capital $28,200
4. Debit: M. Muncel, Capital $22,000; Credit: M. Muncel, Withdrawals $22,000