Exercise 3-58 (Algorithmic) Preparation of Closing Entries James and Susan Morley recently converted a large turn-of-the-century house into a hotel and incorporated the business as Nanaimo Enterprises. Their accountant is inexperienced and has made the following closing entries at the end of Nanaimo's first year of operations: 217,000 Income Summary Service Revenue Accumulated Depreciation 184,000 33,000 Depreciation Expense 33,000 Income Tax Expense 8,200 13,300 Utilities Expense Wages Expense Supplies Expense Accounts Payable Income Summary 66,000 31,000 4,500 156,000 61,000 Income Summary Retained Earnings 61,000 3,200 Dividends Declared Income Summary 3,200 Required: 1. and 2. Indicate what is wrong with the closing entries above by preparing the correct closing entries. Assume that all necessary accounts are presented above and that the amounts given are correct. For those boxes in which no entry is required, leave the box blank. Dec. 31 Service Revenue 184,000 Income Summary 184,000 (Close revenue account) Income Summary 151,500 Depreciation Expense 33,000 8200 Income Tax Expense C Required: 1. and 2. Indicate what is wrong with the closing entries above by preparing the correct closing entries. Assume that all necessary accounts are presented above and that the amounts given are correct. For those boxes in which no entry is required, leave the box blank. Dec. 31 Service Revenue 184,000 Income Summary 184,000 (Close revenue account) Dec. 31 Income Summary 151,500 Depreciation Expense 33,000 Income Tax Expense 8,200 Utilities Expense 13,300 Wages Expense 66,000 Supplies Expense 31,000 (Close expense accounts) Dec. 31 Income Summary Retained Earnings (Close Income Summary) Dec. 31 Retained Earnings 3,200 Dividends Declared 3,200 (Close Dividends Declared)