On December 31, 2007, Bert's Farm Store had the followingaccount balances in its accounting system. All year-end adjustmentshad been entered, but the books had not yet been closed.
Bert's FarmStore
Account BalancesBefore Closing
December 31, 2007
Account Balance Account Balance
Cash $700 SalesRevenue $2,200
Merchandise 2,800 Cost of GoodsSold 900
Supplies 925 WagesExpense 400
PrepaidInsurance 450 UtilitiesExpense 150
Equipment 3,550 DepreciationExpense 50
AccumulatedDepreciation 1,750 InsuranceExpense 100
InterestPayable 150 SuppliesExpense 150
NotesPayable 2.000 Interest Expense 100
Owner'sEquity 4,175
a. What is the purpose of closing the books?
b. Prepare all necessary closingentries.
c. After closing, what is the amount of owner's equity that will be reported on the balance sheet?