Refer to E4-20.

Data From in E4-20

Green Valley Company prepared the following trial balance at the end of its first year of operations ending December 31. To simplify the case, the amounts given are in thousands of dollars. The “Ref.” column is for the reference letter of the adjusting entry effect.

Other data not yet recorded at December 31 include
a. Insurance expired during the current year, $6.
b. Wages payable, $4.
c. Depreciation expense for the current year, $9.
d. Income tax expense, $7.

Required:
1. What are the purposes for “closing the books” at the end of the accounting period?
2. Using the adjusted balances for Green Valley Company in E4-20, prepare the closing entry for the current year.

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1 2 3 (dollars in thousands) 4 Trial Balance Spreadsheet 5 Cash 6 Accounts receivable 7 Prepaid insurance 8 Machinery 9 Accumulated depreciation 10 Accounts payable 11 Wages payable 12 Income taxes payable 13 Common stock (4,000 shares) 14 Additional paid-in capital 15 Retained earnings 16 Revenues (not detailed) 17 Expenses (not detailed) 18 Total GREEN VALLEY COMPANY on December 31 (the end of the first year of operations) ADJUSTED UNADJUSTED ADJUSTMENTS Credit Ref. Debit Credit Debit Credit Debit 20 13 8 85 6 32 164 11 - 4 67 82 164