Mastery Problem: The Accounting Cycle. Chandler, Inc. 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, 2017, 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. Adjusted Trial Balance Before the closing entries are journalized, 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, 2017 Account Title Debit Balances Credit Balances Cash 77,000 Accounts Receivable 29,000 Prepaid Insurance 16,000 Office Equipment 60,000 Accumulated Depreciation-Office Equipment 40,000 Accounts Payable 6,000 Salaries Payable 8,000 Income Taxes Payable 4,000 Common Stock 2,000 Retained Earnings 25,000 Dividends 5,000 Fees Earned 175,600 Rent Revenue 92,000 Interest Revenue 17,200 Salaries Expense 71,000 Selling Expense 31,600 Income Taxes Expense 15,000 Insurance Expense 17,000 Depreciation Expense 47,200 Miscellaneous Expense 1,000 369,800 369,800The Closing Process 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 the following questions (1) - (3). If an amount is zero, enter "0". 1. If a temporary account has an ending balance of $62,000, what is its beginning balance for the following accounting period? 2. If a permanent account has an ending balance of $62,000, 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 somewhat confused about the characteristics of the accounts. He has started by creating the following chart, and asks for your help in completing it. (Select "Yes" or "No" from the below dropdowns.) Temporary Permanent Closed to Account Account Retained Earnings Revenues Yes No Yes Asset accounts No Yes No Expenses Yes No Yes Liability accounts No Yes No Dividends account Yes No Yes Feedback Check My Work 1. Review the definition of a temporary account and what happens to it at the end of the accounting period. 2. Review the definition of a permanent account and what happens to it at the end of the accounting period.Roscoe's Journal Roscoe has attempted to journalize the closing entries for Chandler, Inc. on this panel. He's not sure if he's journalized the entries correctly, and asks you to review them. You find that one entry is correct, but the other is incorrect. Determine which entry is incorrect, and journalize both closing entries for Chandler, Inc. as of Dec. 31. Journal Page 25 Date Description Post. Ref. Debit Credit Dec. 31 Retained Earnings 467,600 Fees Earned 175,600 Rent Revenue 92,000 Interest Revenue 17,200 Salaries Expense 71,000 Selling Expense 31,600 Income Taxes Expense 15,000 Depreciation Expense 47,200 Insurance Expense 17,000 Miscellaneous Expense 1,000 Dec. 31 Retained Earnings 5,000 Dividends 5,000 Journal Roscoe has attempted to journalize the closing entries for Chandler, Inc. on the Roscoe's Journal panel. He's not sure if he's journalized the entries correctly, and asks you to review them. You find that one entry is correct, but the other is incorrect. Determine which entry is incorrect, and journalize both closing entries for Chandler, Inc. as of Dec. 31. If an amount box does not require an entry, leave it blank. Dec. 31 Fees Earned Rent Revenue Interest Revenue Salaries ExpenseSelling Expense Income Taxes Expense Depreciation Expense Insurance Expense Miscellaneous Expense Retained Earnings Dec. 31 Retained Earnings Dividends Feedback Check My Work Review the entries needed to close the accounts at the end of the accounting period, and compare to Roscoe's work to find discrepancies. Post-Closing Trial Balance The post-closing trial balance shows all the permanent accounts with their updated values after the temporary accounts have been reduced to zero balance for the next accounting cycle. Also, the post-closing trial balance is meant to ensure that debits equal credits post-close. Roscoe is very happy with your work on the closing entries for Chandler, Inc., and asks if you would prepare a post-closing trial balance for the company. If an amount box does not require an entry, leave it blank. Chandler, Inc. Post-Closing Trial Balance December 31, 2017 Account Title Debit Balances Credit Balances Cash Accounts Receivable Prepaid Insurance Office Equipment Accumulated Depreciation-Office Equipment Accounts Payable Salaries PayableIncome Taxes Payable Common Stock Retained Earnings Feedback Check My Work After preparing corrected closing entries, update the account balances using the correct accounts and amounts. Feedback Check My Work Partially correct