On December 31, 2004, Bert’s Farm Store had the following account balances in its accounting system. All year end adjustments had been entered, but the books had not yet been closed.
|
Bert’s Farm Store |
|||
|
Account |
Balance |
Account |
Balance |
|
Cash |
$700 |
Sales Revenue |
$2,200 |
|
Merchandise |
2,800 |
Cost of Goods Sold |
900 |
|
Supplies |
925 |
Wages Expense |
400 |
|
Prepaid Insurance |
450 |
Utilities Expense |
150 |
|
Equipment |
3,550 |
Depreciation Expense |
50 |
|
Accumulated Depreciation |
1,750 |
Insurance Expense |
100 |
|
Interest Payable |
150 |
Supplies Expense |
150 |
|
Notes Payable |
2,000 |
Interest Expense |
100 |
|
Owners’ Equity |
4,175 |
||
a. What is the purpose of closing the books?
b. Prepare all necessary closing entries.
c. After closing, what is the amount of owners’ equity that will be reported on the balance sheet?