B-05.

08

Interiors With Oohs and Aahs sells custom home décor. Following is the corporation's income statement. Use
this statement to prepare closing entries. No dividends were declared during the period.

INTERIORS WITH OOHS AND AAHS

Income Statement
For the Year Ending December 31, 20X4

Revenues
Sales $ 887,654
Less: Sales discounts $ 4,667
         Sales returns and allowances 9,880 14,547
Net sales $ 873,107
Cost of goods sold
Beginning inventory, Jan. 1 $ 182,343
Add: Purchases $ 593,356
        Freight-in 21,090
$ 614,446
Less: Purchase discounts $ 3,501
         Purchase returns & allowances 19,009 22,510
Net purchases 591,936
Goods available for sale $ 774,279
Less: Ending inventory, Dec. 31 199,055
Cost of goods sold 575,224
Gross profit $ 297,883
Expenses
Salaries $ 188,000
Insurance 9,152
Utilities 7,760
Freight-out 2,434
Depreciation 13,773 221,119
Net income $ 76,764
Name:
B-05.08
Date: Section:

GENERAL JOURNAL   Page

Date Accounts Debit Credit

Dec. 31 Sales 887,654
Purchase discounts 3,501
purchase returns and allowances 19,009
inventory 199,055
income summary 1,109,219

to close income statement accounts with a credit

balance, and establish end of inventory balance

Dec. 31 income summary 1,032,455

sales discounts 4,667
sales returns and allowances 9,880
purchases 593,356
freight in 21,090
salaries expence 188,000
insurance expense 9,152
utilities expense 7,760
freight out 2,434
depreciation expense 13,773
inventory 182,343

close income statement accounts with a debit

balance, remove beginning inventory balance

Dec. 31 income summary 76,764

retained earnings 76,764

close income summary to retained earnings