Answer :
Sure, let's prepare the entry to close the dividends account for Wilson Trucking Company for the year ended December 31.
### Step-by-Step Solution
1. Identify the Dividend Account:
The dividends account shows the total amount of dividends declared by the company during the year, typically this is debited as it represents a reduction in retained earnings.
2. Understand the Closing Process:
At the end of the accounting period, dividends need to be closed to the Retained Earnings account to reflect the decrease in the company's retained earnings due to the dividends paid out.
### Journal Entry to Close the Dividends Account
1. Determine the Amount of Dividends:
From the adjusted trial balance, we can see that the dividends declared are: \[tex]$23,900. 2. Record the Closing Entry: - Debit Retained Earnings: To decrease retained earnings by the amount of the dividends. - Credit Dividends: To zero out the dividends account. ### Detailed Journal Entry \begin{tabular}{|l|l|l|l|} \hline \textbf{Date} & \textbf{Description} & \textbf{Debit (\$[/tex])} & \textbf{Credit (\[tex]$)} \\ \hline December 31 & Retained Earnings & 23,900 & \\ \hline & Dividends & & 23,900 \\ \hline \end{tabular} ### Calculate the Updated Retained Earnings Original Retained Earnings balance (before closing dividends): \$[/tex]20,400.
Subtract the declared Dividends:
\[tex]$20,400 - \$[/tex]23,900 = \[tex]$-3,500 (This indicates a negative retained earnings balance, implying an accumulated deficit.) ### Result After closing the dividends, the Retained Earnings at December 31 will be: \[ \text{Retained Earnings} = -\$[/tex]3,500
\]
So, the closing entry reduces retained earnings by the amount of dividends, resulting in the following:
1. Journal Entry:
[tex]\[ \text{Retained Earnings} \quad \text{Debit} \quad \$23,900 \][/tex]
[tex]\[ \text{Dividends} \quad \text{Credit} \quad \$23,900 \][/tex]
2. Updated Retained Earnings:
[tex]\[ -\$3,500 \][/tex]
This concludes the closing entries for the dividends account for Wilson Trucking Company for the year end.
### Step-by-Step Solution
1. Identify the Dividend Account:
The dividends account shows the total amount of dividends declared by the company during the year, typically this is debited as it represents a reduction in retained earnings.
2. Understand the Closing Process:
At the end of the accounting period, dividends need to be closed to the Retained Earnings account to reflect the decrease in the company's retained earnings due to the dividends paid out.
### Journal Entry to Close the Dividends Account
1. Determine the Amount of Dividends:
From the adjusted trial balance, we can see that the dividends declared are: \[tex]$23,900. 2. Record the Closing Entry: - Debit Retained Earnings: To decrease retained earnings by the amount of the dividends. - Credit Dividends: To zero out the dividends account. ### Detailed Journal Entry \begin{tabular}{|l|l|l|l|} \hline \textbf{Date} & \textbf{Description} & \textbf{Debit (\$[/tex])} & \textbf{Credit (\[tex]$)} \\ \hline December 31 & Retained Earnings & 23,900 & \\ \hline & Dividends & & 23,900 \\ \hline \end{tabular} ### Calculate the Updated Retained Earnings Original Retained Earnings balance (before closing dividends): \$[/tex]20,400.
Subtract the declared Dividends:
\[tex]$20,400 - \$[/tex]23,900 = \[tex]$-3,500 (This indicates a negative retained earnings balance, implying an accumulated deficit.) ### Result After closing the dividends, the Retained Earnings at December 31 will be: \[ \text{Retained Earnings} = -\$[/tex]3,500
\]
So, the closing entry reduces retained earnings by the amount of dividends, resulting in the following:
1. Journal Entry:
[tex]\[ \text{Retained Earnings} \quad \text{Debit} \quad \$23,900 \][/tex]
[tex]\[ \text{Dividends} \quad \text{Credit} \quad \$23,900 \][/tex]
2. Updated Retained Earnings:
[tex]\[ -\$3,500 \][/tex]
This concludes the closing entries for the dividends account for Wilson Trucking Company for the year end.
