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pg_0016 - Less Cash dividends A Retained earnings December...

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Unformatted text preview: Less: Cash dividends .................... A Retained earnings, December 31 Step 1 Prepare income statement FASTFORWAHD Income Statement For Month Ended December 31. 2009 Revenues Consulting revenue ........................ $7.850 Rental revenue Total revenues ....... Expenses Depreciation expense—Equip .. Salaries expense Insurance expense ................ Rent expense ........................ Supplies expense .................. Utilities expense. Total expenses ........................ Net income ........................................ Point: Sarbanes—Oxley Act requires that financial statements filed with the SEC be certified by the CEO and CFO, including a declaration that the statements fairly present the issuer's operations and financial condition. Violators can receive fines andJ'or prison terms. We usually prepare financial statements in the following order: income statement, statement of retained earnings, and balance sheet. This order makes sense since the balance sheet uses information from the statement of retained earnings, which in turn uses information from the income statement. The statement of cash flows is usually the final statement prepared. Quick Check: Answers—p. 123 10. MIusic—Mart records $1,” of accrued salaries on December 31. Five days later, on January 5 (the next payday), salaries of $7,” are paid. What is the January 5 entry? 11. Jordan Air has the following information in its unadjusted and adjusted trial balances. What are the adjusting entries that Jordan Air likely recorded? Unadjusted Adjusted Debit Credit Debit Credit Prepaid insurance ........ $6.200 $5.900 Salaries payable .......... $ 0 $| .400 12. What accounts are taken from the adjusted trial balance to prepare an income statement? 13. ln preparing financial statements from an adjusted trial balance, What statement is usually prepared second? .' 93 Closing Process P4 Describe and prepare closing entries. Video}. I The closing process is an important step at the end of an accounting period afier financial statements have been completed. It prepares accounts for recording the transactions and the events of the next period. In the closing process we must (1) identify accounts for closing, (2) record and post the closing entries, and (3) prepare a post—closing trial balance. The purpose of the closing process is twofold. First, it resets revenue, expense, and dividends account balances to zero at the end of each period. This is done so that these accounts can properly measure income and dividends for the next period. Second. it helps in summarizing a period's revenues and expenses. This section explains the closing process. Temporary and Permanent Accounts Temporary Accounts Revenues Expenses Dividends Income Summary 1' DnI—In—(I-II than me. 3 .' 96 ...
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