Prepare the annual closing entries for Billings Merchandisers using the partial adjusted trial balance shown below. A physical count at yearend determined that inventory at January 31, 2016, totaled $19,500. Assume Billings uses an Income Summary account in its closing process, and that the income statement for the year shows net income of $102,500.
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Billings Merchandisers Inc.
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Trial Balance (partial)
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January 31, 2016
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Debit
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Credit
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Inventory (2/1/15)
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$23,000
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Retained earnings
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192,000
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Dividends
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4,000
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Sales
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405,000
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Sales returns and allowances
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2,500
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Sales discounts
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4,000
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Purchases
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200,000
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Purchases returns and allowances
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1,200
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Purchase discounts
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900
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Freight-in
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1,500
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Advertising expense
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12,000
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Commissions expense
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6,000
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Rent expense
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24,000
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Salaries and wages expense
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25,000
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Insurance expense
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3,200
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Utilities expense
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$2,900
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Income tax expense
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20,000
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a.
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Service Revenue
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Income Summary
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(To close revenue account)
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b.
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Income Summary
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94,600
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Freight-In expense
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1,500
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Advertising expense
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12,000
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Commissions expense
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6,000
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Rent expense
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24,000
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Salaries and Wages expense
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25,000
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Insurance expense
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3,200
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Utilities expense
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2,900
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Income Tax expense
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20,000
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(To close expense account)
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c.
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Income Summary
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Retained Earnings
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(To close net income to retained earnings)
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d.
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Retained Earnings
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4,000
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Dividends
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4,000
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(To close dividends to retained earnings)
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