1. © 2014 Cengage Learning. All Rights Reserved. Learning Objective © 2014 Cengage Learning. All Rights Reserved. LO4 Prepare closing entries for a corporation.

2. © 2014 Cengage Learning. All Rights Reserved. Closing Entries ●A corporation records four closing entries: 1.A closing entry for income statement accounts with credit balances (revenue and contra-cost accounts). 2.A closing entry for income statement accounts with debit balances (cost, contra revenue, and expense accounts). 3.A closing entry to record net income or net loss in the Retained Earnings account and close the Income Summary account. 4.A closing entry for the Dividends account. SLIDE 2 LO4 Lesson 16-4

3. © 2014 Cengage Learning. All Rights Reserved. Credit Revenue (greater than expenses) (Credit balance is the net income) Debit Expenses The Income Summary Account SLIDE 3 LO4 Lesson 16-4 Income Summary

4. © 2014 Cengage Learning. All Rights Reserved. Closing Entry for Accounts with Credit Balances SLIDE 4 LO4 Lesson 16-4 Closing632,371.75 Sales Bal. 632,371.75 (New Bal.0.00) Adj. (mdse inv.)5,648.44 Interest Expense Closing635,345.90 (credit accounts)

5. © 2014 Cengage Learning. All Rights Reserved. Closing Entry for Accounts with Credit Balances SLIDE 5 LO4 Lesson 16-4 Heading 1 1 Date 2 2 Credit to Income Summary 4 4 3 3 3 3 Debit to Close

6. © 2014 Cengage Learning. All Rights Reserved. Closing Entry for Income Statement Accounts with Debit Balances SLIDE 6 LO4 Lesson 16-4 Income summary 2 2 Date 1 1 Debit to Income Summary 4 4 3 3 Credit to Close 3 3

7. © 2014 Cengage Learning. All Rights Reserved. Summary of Closing Entry for Income Statement Accounts with Debit Balances SLIDE 7 LO4 Lesson 16-4 Bal.254,851.26 (New Bal.0.00) Purchases Closing254,851.26 Closing (credit accounts)635,345.90 (New Bal.79,896.57) Income Summary Adj. (mdse. Inv.)5,643.44 Closing (debit accounts)549,800.89

8. © 2014 Cengage Learning. All Rights Reserved. Closing Entry to Record Net Income SLIDE 8 LO4 Lesson 16-4 Adj. (mdse. inv.)5,643.44 Closing (debit accounts)549,800.89 Closing (Retained Earnings)79,896.57 Closing (credit accounts)635,345.90 (New Bal.0.00) Income Summary Closing (credit accounts)65,218.84 Closing (Retained Earnings)79,896.57 (New Bal.145,115.41) Retained Earnings DateDebit Income Summary Credit Retained Earnings

9. © 2014 Cengage Learning. All Rights Reserved. Closing Entry for Dividends SLIDE 9 LO4 Lesson 16-4 Closing (Dividends)15,000.00Bal.65,218.84 Closing (Income Summary)79,896.57 (New Bal.130,115.41) Retained Earnings Closing (Retained Earnings)15,000.00 Dividends DateDebit Retained Earnings Credit Dividends Bal.15,000.00 (New Bal.0.00)

10. © 2014 Cengage Learning. All Rights Reserved. Completed Closing Entries for a Corporation Recorded in a Journal SLIDE 10 LO4 Lesson 16-4

11. © 2014 Cengage Learning. All Rights Reserved. Lesson 16-4 Audit Your Understanding 1.Where is the information obtained to journalize closing entries for revenue, cost, and expenses? SLIDE 11 ANSWER From the adjusted trial balance Lesson 16-4

12. © 2014 Cengage Learning. All Rights Reserved. Lesson 16-4 Audit Your Understanding 2.What is the name of the temporary account used to summarize the closing entries for revenue, cost, and expenses? SLIDE 12 ANSWER Income Summary Lesson 16-4