Kay Magill Company had the following adjusted trial balance.

KAY MAGILL COMPANY
Adjusted Trial Balance
For the Month Ended June 30, 2015
Account Titles Debit (Adjusted Trial Balance) Credit (Adjusted Trial Balance)
Cash $3,712
Accounts Receivable 3,904
Supplies 480
Accounts Payable $1,556
Unearned Service Revenue 160
Common Stock 4,000
Retained Earnings 1,760
Dividends 628
Service Revenue 4,300
Salaries and Wages Expense 1,344
Miscellaneous Expense 256
Supplies Expense 1,900
Salaries and Wages Payable 448
$12,224 $12,224

Instructions

A.) Prepare closing entries at June 30, 2015.

B.) Prepare a post-closing trial balance.

Explanation:

A. The preparation of the closing entries at June 30, 2015 is presented below:

1. Service Revenue A/c Dr $4,300

                To Income Summary $4,300

(Being revenue account closed)

2. Income summary A/c Dr $3,500

                 To Supplies Expense $1,900

                 To Salaries and Wages Expense $1,344

                 To Miscellaneous Expense $256

(Being expenses accounts are closed)

3. Income summary A/c Dr $800           ($4,300 - $3,500)

                      To Retained earning $800

(Being the difference is credited to retained earning)

4. Retained earnings A/c Dr $628

                         To Dividend A/c $628

(Being dividend account is closed)

2. Now the post-closing trial balance is presented below:

Particulars                                    Debit                           Credit

Cash                                             $3,712

Accounts Receivable                  $3,904

Supplies                                       $480

Accounts Payable                                                             $1,556

Unearned Service Revenue                                             $160

Common Stock                                                                  $4,000

Retained Earnings                                                              $1,932    

Salaries and Wages Payable                                             $448

Total                                              $8,096                           $8,096

The retained earnings is

= $1,760 + $800 - $628

= $1,932

yes the correct answer was

b.the increased supply will create a surplus.