Scenario: You were recently hired by a $35 million manufacturing company ($35 million in sales) as the company staff accountant. The controller (your boss) has asked you to explain several accounting practices to the two existing members of the accounting staff. The four areas the controller wants you to explain to the staff include, Closing entries Retained Earnings Statement Year-end Adjustments Weighted-Average Common Shares Outstanding Note: The previous months financial statements (prepared just before you were hired) were incorrect. The Controller did not catch the errors before the incorrect financials were presented to the President. The Controller has become heavily involved in company operations (hoping to become the Chief Operating Officer) and does not have the time to carry out all the accounting responsibilities. It became clear last month that the company needed to hire an accountant with a four-year accounting degree (you).

1. Closing entries S Nashville Nets Inc. Adjusted Trial Balance December 31, 2018 Debit Credit 1,000,000 9,000,000 25,000,000 2,400,000 105,350,000 1,250,000 41,950,000 14,150,000 3,340,000 120.000 50.000 21,580,000 Common Stock, Par $ 0.10 A PIC (Additional Paid in Capital in Excess of Par) Retained Earnings Dnidends Paid Sales Sales Discounts Cost of Goods Sold (COGS Selling Expenses Administrative Expenses Rent Revenue Loss on sale of equipment Income Tax Expense 5 S 5 5 s Items to incorporate into your instruction manual for closing entries (including the partial trial balance provided above) are as follows: 1 How does the accountant know that the Retained Earnings balance of 525 million is the balance as of the beginning of the year? Using the balances provided above, how could a quick addition/subtraction exercise on your calculator provide net income? How could the accountant calculate ending retained earnings without preparing the retained earnings statement? Explain the closing process utilizing the income summary account. Provide "T" accounts in your explanation along with the journal entries. 2. Retained Earnings Statement (use the same financial information tied to your closing entries instruction manual) Explain what the retained earnings statement calculates. Explain why dividends are only included in the retained earnings statement Note: One of the errors in last months financials was the double counting of dividends (included in the retained earnings statement as well as the stockholders' equity section)