Journalize Closing Entries

Interpretive Question: What is your overall assessment of the financial health of SMC, Inc.?

As arecently hired accountantfor a smallbusiness,SMC,Inc., you are providedwithlast years balance sheet, income statement, and post-closing trial balance to familiarize yourself with the business.

SMC, Inc. Balance Sheet December 31, 2020 Assets Cash ......................................................................................................... $34,500 Accounts receivable ................................................................................ 25,000 Inventory .................................................................................................. 10,000 Supplies ................................................................................................... 200 Total assets.............................................................................................. $69,700 Liabilities and Stockholders Equity Liabilities: Accounts payable ............................................................................. $12,000 Salaries payable ............................................................................... 1,000 Income taxes payable ...................................................................... 3,675 Total liabilities.......................................................................................... $16,675 Stockholders equity: Capital stock (10,000 shares outstanding).................................... $25,000 Retained earnings ............................................................................ 28,025 Total stockholders equity ....................................................................... 53,025 Total liabilities and stockholders equity................................................ $69,700 SMC, Inc. Income Statement For the Year Ended December31,2020 Sales revenue .......................................................................................... $110,000 Rent revenue ........................................................................................... 1,000 Total revenues......................................................................................... $111,000 Less cost of goods sold........................................................................... 60,000 Gross profit ........................................................................................... $ 51,000 Less operating expenses: Supplies expense ............................................................................. $ 400 Salaries expense .............................................................................. 22,000 Miscellaneous expense................................................................... 4,100 26,500 Income beforetaxes................................................................................ $ 24,500 Less income taxes................................................................................... 3,675 Net income............................................................................................... $ 20,825 Earnings per share ( $20,825 / 10,000shares) $ 2.08

SMC, Inc. Post-Closing Trial Balance December 31, 2020 Debits Credits Cash ......................................................................................................... $34,500 Accounts Receivable............................................................................... 25,000 Inventory .................................................................................................. 10,000 Supplies ................................................................................................... Accounts Payable.................................................................................... 200 $12,000 Salaries Payable ...................................................................................... 1,000 Income TaxesPayable............................................................................. 3,675 Common Stock............................................................................................ 25,000 Retained Earnings ................................................................................... 28,025 Totals........................................................................................................ $69,700 $69,700