Question

P4-7 (Algo) Recording Adjusting and Closing Entries and Preparing a Balance Sheet and Income Statement Including Earnings per Share LO4-1, 4-2, 4-4

[The following information applies to the questions displayed below.]

Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31:

Tunstall, Inc. Unadjusted Trial Balance for the Year Ended December 31
	Debit				Credit
Cash		47,400
Accounts receivable		10,600
Supplies		500
Prepaid insurance		640
Service trucks		16,600
Accumulated depreciation						9,000
Other assets		9,660
Accounts payable						2,240
Wages payable
Income taxes payable
Note payable (3 years; 10% interest due each December 31)						13,000
Common stock (5,000 shares outstanding)						1,996
Additional paid-in capital						17,964
Retained earnings						5,800
Service revenue						84,940
Wages expense		16,200
Remaining expenses (not detailed; excludes income tax)		33,340
Income tax expense
Totals		134,940				134,940

Data not yet recorded at December 31 included:

1. The supplies count on December 31 reflected $140 in remaining supplies on hand to be used in the next year.
2. Insurance expired during the current year, $640.
3. Depreciation expense for the current year, $4,200.
4. Wages earned by employees not yet paid on December 31, $670.
5. Income tax expense, $5,680.

P4-7 Part 3

3. Record the closing entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

First, pass the adjusting entries:
Date	Account Titles and Explanation	Debit ($)	Credit ($)
Dec-31	Supplies expense ($500-$140)	360
	Supplies		360
	(To record the supplies expense)
Dec-31	Insurance expense	640
	Prepaid insurance		640
	(To record the insurance expense)
Dec-31	Depreciation expense	4200
	Accumulated depreciation		4200
	(To record the depreciation expense)
Dec-31	Wages expenses	670
	Wages payable		670
	(To record the wage expense)
Dec-31	Income tax expenses	5680
	Income tax payable		5680
	(TO record the income tax expense)

Closing entries:
Date	Account Titles and Explanation	Debit ($)	Credit ($)
Dec-31	Service revenue	84940
	Income summary		84940
	(To close the revenues account)
Dec-31	Income summary account	61090
	Remaining expense		33340
	Supplies expense		360
	Depreciation expense		4200
	Insurance expense		640
	Wages expense ($16,200+$670)		16870
	Income tax expense		5680
	(To close the expense accounts)
Dec-31	Income summary	23850
	Retained earnings		26040
	(To close the income summary account)