Preparing and Analyzing Closing Entries}

Refer to the information for Sparrow Company above.

\section*{Required:}

1. Prepare the closing entries for Sparrow at December 31, 2018.

2. How does the closing process affect retained earnings?

\section*{Brief Exercise

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Sparrow Company Adjusted Trial Balance December 31, 2018 Debit Credit Cash Accounts Receivable Prepaid Insurance Equipment Accumulated Depreciation, Equipment Accounts Payable $ 3,150 5,650 4,480 42,000 $ 24,000 2,800 Salaries Payable Unearned Service Revenue Common Shares 4,450 3,875 8,000 Retained Earnings Dividends Declared Service Revenue 2,255 10.500 99,600 Salaries Expense 49,400 Rent Expense 17,250 Insurance Expense 2,200 Depreciation Expense 4,950 Income Tax Expense 5,400 Total 144.980 144,980