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	86,000
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		18,000
Dividends	5,000
Fees Earned		185,600
Rent Revenue		92,000
Interest Revenue		17,200
Salaries Expense	71,000
Selling Expense	25,600
Income Taxes Expense	15,000
Insurance Expense	17,000
Depreciation Expense	47,200
Miscellaneous Expense	1,000
	372,800	372,800

The 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 $67,000, what is its beginning balance for the following accounting period?

_______

2. If a permanent account has an ending balance of $67,000, 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.)

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 Account	Permanent Account	Closed to Retained Earnings
Revenues
Asset accounts
Expenses
Liability accounts
Dividends account

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		471,600
	Fees Earned			185,600
	Rent Revenue			92,000
	Interest Revenue			17,200
	Salaries Expense			71,000
	Selling Expense			25,600
	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		______
		______
		______
		______
		______
		______
Dec. 31

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 Payable	____________	_____________
Income Taxes Payable	____________	_____________
Common Stock	____________	_____________
Retained Earnings	____________	_______
	____________	______