EYK5_2 - E x t e n d Y o u r K n o w l e d g e 5 2 C h a p...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: E x t e n d Y o u r K n o w l e d g e 5 - 2 : C h a p t e r 5 C o r p o r a t e S u p p l e m e n t The closing process for a corporation is the same as described for a sole propri- etorship on pages 206 to 211 of the textbook. The difference is into which accounts the income summary and cash dividends are closed. Exhibit CS5.1 summarizes the closing process for a corporation. Two differences can be identified in the closing process of a corporation versus a proprietorship when comparing Exhibit CS5.1 above with Exhibit 5.9 on page 207 of the textbook. First, Step 3 shows the Income Summary being closed to the Retained Earnings account above. For a sole proprietorship, the Income Summary is closed to the owner’s capital account. The second difference is in Step 4: Cash Dividends is closed to Retained Earnings for a corporate entity but withdrawals, the equivalent of dividends, is closed to the owner’s capital account in a propri- etorship. Regardless of the differences, notice that for both the result is the same: all temporary (or nominal) accounts are closed to equity at the end of the accounting period. Exhibit CS5.1 Closing Process for a Corporation 1 2 2 3 3 4 4 Close revenue accounts to Income Summary account. Close expense accounts to Income Summary account. Close Income Summary account to Retained Earnings account. Close Cash Dividends account to Retained Earnings account. Expense Accounts 1 Four-Step Closing Process Income Summary Cash Dividends Retained Earnings Revenue Accounts EYK5-2:2 Extend Your Knowledge 5-2: Chapter 5 Corporate Supplement The alphabetized adjusted trial balance for Maritime Touring Corporation after its second year of operations follows: Required 1. Enter the adjusted trial balance onto a work sheet. 2. Complete the work sheet. 3. Calculate the balance in the retained earnings account as it would appear on the April 30, 2005 balance sheet. E x e r c i s e s Exercise CS5-1 Preparing a work sheet Check figure: 3. Retained earnings, April 30, 2005 5 $21,000 Maritime Touring Corporation Work Sheet For Year Ended April 30, 2005 Adjusted Trial Balance Account Debit Credit Accounts payable........................................................................ $ 3,350 Accounts receivable.................................................................... $ 26,000 Accumulated amortization, tour boats......................................... 16,200 Cash............................................................................................ 14,000 Cash dividends............................................................................ 52,000 Common shares.......................................................................... 200,000 Gas and oil expense.................................................................... 32,000 Income tax expense.................................................................... 10,000 Office supplies ............................................................................ 950...
View Full Document

This note was uploaded on 08/22/2009 for the course ACCT 1101 taught by Professor Davescott during the Fall '05 term at Niagara College.

Page1 / 6

EYK5_2 - E x t e n d Y o u r K n o w l e d g e 5 2 C h a p...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online