Question 3

Hammerstone Consulting provides risk management services to individuals and to corporate clients . The company closes its temporary accounts once each year on December 31. The company recently issued the following income statement as part of its annual report:

HAMMERSTONE CONSULTING Income Statement For The Year Ended December 31, 2015
Revenue:
Consulting revenueindividual clients			$	60,000
Consulting revenuecorporate clients				240,000
			$	300,000
Expenses:
Advertising expense	$	24,000
Depreciation expense: computers		36,000
Rent expense		14,400
Office supplies expense		6,600
Travel expense		86,700
Utilities expense		4,950
Telephone and Internet expense		2,850
Salaries expense		233,250
Interest expense		3,750		412,500
Net loss			$	(112,500)

The firm's statement of retained earnings indicates that a $37,500 cash dividend was declared and paid in 2015.

a.	Prepare the necessary closing entries on December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b.	If the firm's Retained Earnings account had a $450,000 balance on January 1, 2015, at what amount should Retained Earnings be reported in the firm's balance sheet dated December 31, 2015?