At the beginning of Year 1, Oak Consulting had the following normal balances in its accounts:

Account                                                               Balance
Cash .................................................................$42,000
Accounts Receivable ......................................25,000
Accounts Payable ...........................................8,400
Common Stock ...............................................24,000
Retained Earnings ..........................................34,600

The following events apply to Oak Consulting for Year 1:
1. Provided $185,000 of services on account.
2. Incurred $45,800 of operating expenses on account.

3. Collected $140,000 of accounts receivable.
4. Paid $120,000 cash for salaries expense.
5. Paid $31,400 cash as a partial payment on accounts payable.
6. Paid a $10,000 cash dividend to the stockholders.

Required
a. Record these transactions in a general journal.
b. Open T-accounts, and post the beginning balances and the preceding transactions to the appropriate accounts.
c. Show the beginning balances and the transactions in a horizontal statements model such as the following one:

d. Record the closing entries in the general journal and post them to the T-accounts. What is the amount of net income for the year?
e. What is the amount of change in retained earnings for the year? Is the change in retained earnings different from the amount of net income? If so, why?
f. Prepare a post-closing trial balance.

Transcribed Image Text:

Balance Sheet Statement of Cash Income Statement Stk. Equity + Ret. Earn. Assets Llab. Accts. Rec. Flows Cash Com. Stk. Rev. - Exp. = Net Inc. Accts. Pay.