Chapter 3: Adjusting Accounts for Financial Statements

Draw in the correct number (1-4) in the blank white circles.

Identify which of the following are Temporary Accounts

• Income Summary

• Common Stock

• Retained Earnings

• Dividends

Use the adjusted trial balance for Magic Company to prepare the first step in the closing process.

Debit the account _________ and credit to ___________

Use the adjusted trial balance for Magic Company to prepare the second step in the closing process.

Debit ___________ and credit_________and_________

Use the adjusted trial balance for Magic Company to prepare the third step in the closing process.

Debit Income summary to close the account and credit the _______ _______ account

Use the adjusted trial balance for Magic Company to prepare the final step in the closing process.

Debit retained earnings and credit __________.

Select the account that does NOT belong on the post closing trial balance

• Cash

• Retained Earnings

• Dividends

• Accounts Payable

Ace Company reports revenues of $40,000 and expenses of $31,000. The company paid $5,000 cash in dividends this period. After closing entries are recorded, determine the amount of the increase or decrease in the Retained Earnings Account.

Answer explanation

40000-31000-5000= increase of $4000