Chandler, Inc. is owned by Roscoe Chandler and provides appraisal services to individuals and companies wishing to purchase and sell fine art. Chandler, Inc. began business on January 1, 2016, and is just completing its first year of business. Roscoe asks for your help in completing the accounting cycle for the company by assisting with the closing process.

Before the closing entries are made, you begin with an adjusted trial balance. The closing entries are essentially the link from the adjusted trial balance to the post-closing trial balance.

Chandler, Inc.

ADJUSTED TRIAL BALANCE

December 31, 2016

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	76,000.00
2	Accounts Receivable	29,000.00
3	Prepaid Insurance	16,000.00
4	Equipment	60,000.00
5	Accumulated Depreciation-Equipment		40,000.00
6	Accounts Payable		6,000.00
7	Salaries Payable		8,000.00
8	Income Taxes Payable		4,000.00
9	Common Stock		2,000.00
10	Retained Earnings		18,000.00
11	Dividends	5,000.00
12	Income Summary
13	Fees Earned		175,600.00
14	Rent Revenue		92,000.00
15	Interest Revenue		17,200.00
16	Salaries Expense	71,000.00
17	Selling Expense	25,600.00
18	Income Taxes Expense	15,000.00
19	Depreciation Expense-Equipment	47,200.00
20	Insurance Expense	17,000.00
21	Miscellaneous Expense	1,000.00
22	Totals	362,800.00	362,800.00

The final step of the accounting cycle is the closing process. The main goal of this stage of the cycle is to ensure that the balance of each temporary account is returned to zero and that net income is transferred to the retained earnings account. The first step in successfully undertaking the closing process is to understand the difference between a temporary account and a permanent account. Roscoe has some questions about the process.

Answer questions (1) - (3) below.

1. If a temporary account has an ending balance of $57,000, what is its beginning balance for the following accounting period?

2. If a permanent account has an ending balance of $57,000, what is its beginning balance for the following accounting period?

3. Roscoe will be preparing his yearly financial statements after completing Chandler, Inc.s closing process, and is a somewhat confused about the characteristics of the accounts on his Chart of Accounts. He has started by creating the chart below, and asks for your help in completing it. For each account or type of account listed, choose all descriptions that apply.

Temporary Account

Permanent Account

Closed to Income Summary Account

Yes

No

Revenues

Asset accounts

Retained Earnings account

Expenses

Liability accounts

Dividends account

Roscoe has attempted to prepare the closing entries for Chandler, Inc. on this panel. Hes not sure if hes entered the journal entries correctly, and asks you to review them. You find that two of the entries are correct, but two are incorrect.

Determine which entries are incorrect, and enter all four of the closing entries for Chandler, Inc. as of Dec. 31 on the Journal panel.

PAGE 25

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Closing Entries
2	Dec. 31	Income Summary		284,800.00
3		Fees Earned			175,600.00
4		Rent Revenue			92,000.00
5		Interest Revenue			17,200.00
6	31	Income Summary		176,800.00
7		Salaries Expense			71,000.00
8		Selling Expense			25,600.00
9		Income Taxes Expense			15,000.00
10		Depreciation Expense-Equipment			47,200.00
11		Insurance Expense			17,000.00
12		Miscellaneous Expense			1,000.00
13	31	Retained Earnings		461,600.00
14		Income Summary			461,600.00
15	31	Retained Earnings		5,000.00
16		Dividends			5,000.00