The Gerde Clinic, 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:

Gerde’s statement of retained earnings indicates that a $25,000 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 Gerde’s Retained Earnings account had a $400,000 balance on at the beginning of the current year, at what amount should Retained Earnings be reported in the clinic’s year-end balance sheet on December 31 of the current year?

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Revenue: THE GERDE CLINIC, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, CURRENT YEAR Counseling revenue Expenses: Advertising expense. Salaries expense... Office supplies expense Utilities expense Malpractice insurance expense Office rent expense Continuing education expense.. Depreciation expense: fixtures. Miscellaneous expense. Income taxes expense.. Net income.... $ 7,000 620,000 4,000 6,000 12,000 64,000 8,000 9,000 3,000 72,000 $960,000 805,000 $155,000