question archive Fick Psychological Services, Inc
Fick Psychological Services, Inc
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Fick Psychological Services, Inc., closes its temporary accounts once each year on December 31. The company recently issued the following income statement as part of its annual report.
FICK PSYCHOLOGICAL SERVICES, INC.
Income Statement
For the year ended December 31, current year
Revenue: Counseling revenue $ 370,000
Expenses : Advertising expense $ 1,700 Salaries expense 93,000 Office supplies expense 2,500 Utilities expense 1,000 Malpractice insurance expense 6,000 Office rent expense 23,000 Continuing education expense 2,900 Depreciation expense: fixtures 3,500 Miscellaneous expense 7,000 Income taxes expense 26,500
167,100
Net income $ 202,900
Fick's statement of retained earnings indicates that a $8,000 cash dividend was declared and paid during the current year.
a. Prepare the necessary closing entries on December 31 of the current year.
b. If Fick's Retained earnings account had a $90,000 balance on at the beginning of the current year, at what amount should Retained Earnings be reported in the firm's year-end balance sheet dated December 31?
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Answer:
Requirement a:
| Date | Account title and explanation | Debit | Credit |
| Dec 31 | Counseling revenue | $370,000 | |
| Income summary | $370,000 | ||
| [To close revenue accounts] | |||
| Dec 31 | Income summary | $167,100 | |
| Advertising expense | $1,700 | ||
| Salaries expense | $93,000 | ||
| Office supplies expense | $2,500 | ||
| Utilities expense | $1,000 | ||
| Malpractice insurance expense | $6,000 | ||
| Office rent expense | $23,000 | ||
| Continuing education expense | $2,900 | ||
| Depreciation expense: Fixtures | $3,500 | ||
| Miscellaneous expense | $7,000 | ||
| Income taxes expense | $26,500 | ||
| [To close expenses accounts] | |||
| Dec 31 | Income summary [370000-167100] | $202,900 | |
| Retained earnings | $202,900 | ||
| [To close income summary accounts] | |||
| Dec 31 | Retained earnings | $8,000 | |
| Dividends | $8,000 | ||
| [To close dividends accounts] |
Requirement b:
| Retained earnings, Beginning | $90,000 |
| Add: Net income | $202,900 |
| (Less): Dividends | ($8,000) |
| Retained earnings, Ending | $284,900 |
