Use the following image (only if needed), to answer the T/F question below.

QUESTION:

Closing entries reset the balance in retained earnings to zero.

o True

o False

1. Kissimmee, Inc. has the following transactions for January 2015: a. Kissimmee, Inc. (a retail store) begins business on January 1, 2015 with a $100,000 cash contribution from the owners. b. On January 1, 2015, Kissimmee prepays the monthly rent of $5,000 cash. c. On January 27, 2015, Kissimmee issues a 12%, 10-year note payable interest-only payable on the 1st of the following month) to purchase warehouse equipment for $50,000 (4% residual value, 4-year expected life, straight-line method). d. On January 10, 2015, Kissimmee purchases goods on credit from a wholesaler for $18,000 e. On January 15, 2015, Kissimmee pays wages due employees in the amount of $3,000 cash. f. On January 20, 2015, Kissimmee pays various utility expenses in the amount of $1,300 cash. g. On January 25, 2015, Kissimmee makes credit sales of goods (cost of $15,000) to customers for $35,000. h. On January 26, 2015, Kissimmee settles $10,000 of accounts payable with cash payments. i. On January 31, 2015, Kissimmee collects $3,000 from previous credit sales. j. The February 9, 2015 payroll includes $1,200 of salaries and wages earned during January 2015. 2. Prepare the JEs, adjusting entries, trial balance, income statement, closing entries and balance sheet for the transactions above. Ref Account description Debit Credit (a) $100.000 Cash Contributed capital $100,000 (b) $5,000 Prepaid Rent Cash $5.000 (c) $50,000 Equipment (PP&E) Note Payable $50.000 (d) $18.000 Inventory Accounts payable $18,000 (e) $3,000 Salary and wage expense Cash $3,000 (f) Utility expense $1,300 Cash $1,300 (g) $35,000 $15.000 Accounts receivable Cost of goods sold Inventory Revenue $15,000 $35.000 (h) $10.000 Accounts payable Cash $10,000 (1) $3,000 Cash Accounts receivable $3.000 $500 AJE Interest expense Interest payable S500 AJE $5,000 Rent expense Prepaid rent $5.000 AJE Depreciation expense Accumulated depreciation $1,000 $1,000 $1.200 AJE Salary and wage expense Salary and wages payable $1.200 Totals $248.000 $248,000 Credit Adjusted Trial Balance Account Description Debit Cash $83.700 Accounts receivable $32,0002 Inventory $ 3,000 Prepaid rent $ -0- Property, plant and equipment $ 50,000 Accumulated depreciation Accounts payable Salary and wages payable Interest payable Notes payable Contributed capital Revenue Cost of goods sold (expense) $15,000 Salary and wage expense $ 4.200 Utility expense $ 1,300 Rent expense $ 5,000 Depreciation expense $ 1,000 Interest expense $ 500 $195,700 $ 1,000 $ 8.0004 $ 1,200 $ 500 $ 50,000 $100,000 $ 35,000 $195,700 Income Statement for the period ending 1/31/2015 Revenues $35.000 Cost of goods sold $15,000 Gross Margin $20,000 Expenses: Salary and wage expense Utility expense Rent expense Depreciation expense Interest expense Total expenses $ 4.200 $ 1,300 $ 5.000 $1,000 $ 500 $12,000 Net income $ 8,000 1 100000-5000-3000-1300-10000+3000=83,700 2 35000-3000=17,000 3 18000-15000=3,000 + 18000-10000=8000 Closing entries: CL $35,000 Revenue Cost of goods sold Salary and wage expense Utility expense Rent expense Depreciation expense Interest expense Retained earnings $15,000 $ 4,200 $ 1,300 $ 5,000 $1,000 $ 500 $ 8,000 Assets Cash Accounts receivable Inventory Prepaid rent Total current assets $ 83,700 $ 32,000 $ 3,000 $ -0- $118,700 Balance Sheet @ 1/31/2015 Liabilities A/P Salaries and wages payable Interest payable Total current liabilities $ $ $ $ 8,000 1.200 500 9,700 Notes payable Total non-current liabilities $ 50,000 $ 50,000 PP&E Accumulated depreciation Net PP&E Total non-current assets $ 50,000 $ 1.000 $ 49,000 $ 49,000 Total liabilities $ 59,700 Shareholders' Equity Contributed capital Earned capital Total shareholders' equity $100,000 $ 8,000 $108,000 Total assets $167,700 Total liabilities & shareholders' equity $167,700