Journalize the adjusting and closing entries of Draper Production Company at December 31. There was only one adjustment to Service Revenue. Account Unadjusted Trial Balance From the Adjusted Trial Balance Cash 14,800 Prepaid rent 1,000 Equipment 44,000 Accumulated depreciation 3,100 Accounts payable 5,100 Salary payable Unearned service revenue 9,300 Income tax payable Notes payable, long-term 13,000 Common stock 8,500 Retained earnings 14,100 Dividends 1,300 Service revenue 13,600 20,100 Salary expense 4,600 5,100 Rent expense 1,000 1,300 Depreciation expense 400 Income tax expense 1,000 Total 66,700 66,700 7,800 20,100 Requirement 1. Journalize the adjusting and closing entries of Draper Production Company at December 31. There was only one adjustment to Service Revenue.

E3-31A (Learning Objectives 3, 5: Identifying and recording adjusting and closing entries) The unadjusted trial balance and income statement amounts from the December 31 adjusted trial balance of Draper Production Company follow. Draper Production Company Requirement 1. Journalize the adjusting and closing entries of Draper Production Company at December 31. There was only one adjustment to Service Revenue. Draper Industries Adjusting journal entries: Date Account titles/Description Debits Credits 31-Dec Accounts receivable $20,100 Service revenue $20,100 (Being the service revenue earned billed) Note: It is given that there was only one adjustment to service revenue. When the adjustment amount is $20,100, unearned revenue balance is only $9,300. As only "one adjustment" is mentioned, it is assumed that the entire $20,100 is debited to accounts receivable and not to unearned revenue. 31-Dec Salary expense $5,100 Salary payable (Being the salaries expense incurred during the period) $5,100 31-Dec Rent expense $1,300 Prepaid rent $1,000 Rent payable/Accounts payable $300 (Being the rent expense for the period) Note: The prepaid rent balance is only $1,000 whereas the adjusting rent expense entry is $1,300. Therefore it is assumed that the balance of $300 remains payable. 31-Dec Depreciation expense $400 Accumulated depreciation (Being the depreciation expense for the period) $400 31-Dec Income tax expense $1,000 Income tax payable (Being the income tax payable for the period) $1,000 Closing Journal entries: 31-Dec Service revenue $33,700 Income summary (Being the revenue closed to income summary) (please refer cell reference for calculations) $33,700 31-Dec Income summary $13,400 Salary expense $9,700 (please refer cell reference for calculations) Rent expense $2,300 (please refer cell reference for calculations) Depreciation expense $400 Income tax expense $1,000 (Being the expense accounts closed to income summary) 31-Dec Retained earnings $1,300 Dividends (Being the dividends closed to retained earnings) $1,300 31-Dec Income summary $20,300 Retained earnings (Being the net income closed to retained earnings) $20,300 (please refer cell reference for calculations) Comments on closing entries: Closing entries are meant to close the temporary accounts like revenue accounts and expense accounts. The temporary accounts includes income statement accounts and dividend. The revenue and all expense accounts are closed to another account called "Income summary account" which is further closed to Retained earnings account. This represents the net income or loss being transferred to Income summary account and then to retained earnings. Dividends paid is debited or closed to retained earnings account. When the closing entries are made, only the permanent accounts (the balance sheet accounts) will have balances. Draper Industries Adjusting journal entries: Date Account titles/Description Debits Credits 31-Dec Accounts receivable $20,100 Service revenue $20,100 (Being the service revenue earned billed) Note: It is given that there was only one adjustment to service revenue. When the adjustment amount is $20,100, unearned revenue balance is only $9,300. As only "one adjustment" is mentioned, it is assumed that the entire $20,100 is debited to accounts receivable and not to unearned revenue. 31-Dec Salary expense $5,100 Salary payable (Being the salaries expense incurred during the period) $5,100 31-Dec Rent expense $1,300 Prepaid rent $1,000 Rent payable/Accounts payable $300 (Being the rent expense for the period) Note: The prepaid rent balance is only $1,000 whereas the adjusting rent expense entry is $1,300. Therefore it is assumed that the balance of $300 remains payable. 31-Dec Depreciation expense $400 Accumulated depreciation (Being the depreciation expense for the period) $400 31-Dec Income tax expense $1,000 Income tax payable (Being the income tax payable for the period) $1,000 Closing Journal entries: 31-Dec Service revenue $33,700 Income summary (Being the revenue closed to income summary) (please refer cell reference for calculations) $33,700 31-Dec Income summary $13,400 Salary expense $9,700 (please refer cell reference for calculations) Rent expense $2,300 (please refer cell reference for calculations) Depreciation expense $400 Income tax expense $1,000 (Being the expense accounts closed to income summary) 31-Dec Retained earnings $1,300 Dividends (Being the dividends closed to retained earnings) $1,300 31-Dec Income summary $20,300 Retained earnings (Being the net income closed to retained earnings) $20,300 (please refer cell reference for calculations) Comments on closing entries: Closing entries are meant to close the temporary accounts like revenue accounts and expense accounts. The temporary accounts includes income statement accounts and dividend. The revenue and all expense accounts are closed to another account called "Income summary account" which is further closed to Retained earnings account. This represents the net income or loss being transferred to Income summary account and then to retained earnings. Dividends paid is debited or closed to retained earnings account. When the closing entries are made, only the permanent accounts (the balance sheet accounts) will have balances