Problem-1
Use the following information for questions 1–7
The income statement for the year 2008 of Nova Co. contains the following information:
Revenues $70,000
Expenses:
Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 6,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 73,500
Net income (loss) $(3,500)
1. The entry to close the revenue account includes a
a. debit to Income Summary for $3,500.
b. credit to Income Summary for $3,500.
c. debit to Revenues for $70,000.
d. credit to Revenues for $70,000.
2. The entry to close the expense accounts includes a
a. debit to Income Summary for $3,500.
b. credit to Income Summary for $3,500.
c. debit to Income Summary for $73,500.
d. debit to Wages Expense for $2,500.
3. After the revenue and expense accounts have been closed, the balance in Income Summary will be
a. $0.
b. a debit balance of $3,500.
c. a credit balance of $3,500.
d. a credit balance of $70,000.
4. The entry to close Income Summary to Nova, Capital includes
a. a debit to Revenue for $70,000.
b. credits to Expenses totalling $73,500.
c. a credit to Income Summary for $3,500.
d. a credit to Nova, Capital for $3,500.
5. At January 1, 2008, Nova reported owner’s equity of $50,000. Owner drawings for the year totalled
$10,000. At December 31, 2008, the company will report owner’s equity of
a. $13,500.
b. $36,500.
c. $40,000.
d. $43,500.
6. After all closing entries have been posted, the Income Summary account will have a balance of
a. $0. b. $3,500 debit.
c. $3,500 credit. d. $36,500 credit.
7. After all closing entries have been posted, the revenue account will have a balance of
a. $0. b. $70,000 credit.
c. $70,000 debit. d. $3,500 credit.
Problem-2
Instructions:
(a) Prepare the closing entries that were made.
(b) Post the closing entries to Income Summary.
Problem#3
Problem# 4
The adjusted trial for Porter Company are as follows.
PORTER COMPANY
Adjusted Trial Balance
December 31, 2010
Dr. Cr.
Notes Payable 20,000
Supplies 2,300
Prepaid Insurance 4,400
Salaries Expense 39,000
Accounts Receivable 16,200
Interest Payable 1,000
B. Porter, Capital 36,000
Service Revenue 77,800
Advertising Expense 12,000
Supplies Expense 3,700
Cash 18,800
Interest Expense 1,000
Office Equipment 44,000
Accumulated Depreciation—Office Equipment 20,000
Insurance Expense 4,000
Accounts Payable 8,000
B. Porter, Drawing 12,000
Depreciation Expense 8,000
Salaries Payable 2,600
165,400 165,400
Instructions
(a) Prepare the income statement and statement of owner’s equity.
(b) Prepare a classified balance sheet for Porter Company at December 31, 2010 assuming $10,000 of
the notes payable become due in 2011. B. Porter did not make any additional investments in the
business during 2010.
