Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (the amounts are rounded to thousands of dollars to simplify): Account Titles Debit Credit
Cash $2
Accounts Receivable 6
Supplies 13
Land 0
Equipment 54
Accumulated Depreciation $5
Software 21
Accumulated Amortization 6
Accounts Payable 4
Notes Payable (short-term) 0
Salaries and Wages Payable 0
Interest Payable 0
Income Tax Payable 0
Common Stock 72
Retained Earnings 9
Service Revenue 0
Salaries and Wages Expense 0
Depreication Expense 0
Amortization Expense 0
Income Tax Expense 0
Interest Expense 0
Supplies Expense 0
Totals 85 85

Required

a. In the journal, record the entry to close revenue and expense accounts to retained earnings.
b. Post the closing statement.

H & H Tool, Inc.

a. Journal (Closing Entries):

Debit Revenue $000

Credit Retained Earnings $000

To close the revenue accounts to the retained earnings.

Debit Retained Earnings $000

Credit Expenses $000

To close the expense accounts to the retained earnings.

b. General Ledger Accounts:

Cash

Date   Account Titles            Debit        Credit

Jan. 1  Balance                      $2

Accounts Receivable

Date   Account Titles            Debit        Credit

Jan. 1  Balance                      $6

Supplies

Date   Account Titles            Debit        Credit

Jan. 1  Balance                      $13  

Equipment

Date   Account Titles            Debit        Credit

Jan. 1  Balance                      $54

Accumulated Depreciation

Date   Account Titles            Debit        Credit

Jan. 1  Balance                                       $5

Software

Date   Account Titles            Debit        Credit

Jan. 1  Balance                       $21

Accumulated Amortization

Date   Account Titles            Debit        Credit

Jan. 1  Balance                                       $6

Accounts Payable

Date   Account Titles            Debit        Credit

Jan. 1  Balance                                       $4

Common Stock

Date   Account Titles            Debit        Credit

Jan. 1  Balance                                       $72

Retained Earnings

Date   Account Titles            Debit        Credit

Jan. 1  Balance                                       $9

Explanation:

a) Trial Balance as of January 1, 2018:

Account Titles            Debit        Credit

Cash                              $2

Accounts Receivable      6

Supplies                         13  

Equipment                    54

Accumulated Depreciation             $5

Software                        21

Accumulated Amortization               6

Accounts Payable                             4

Common Stock                               72

Retained Earnings                            9

Totals                           96              96

b) The revenue and expenses have zero balances.  This means that they had been closed to the retained earnings account (Income Summary) before now.  There is no logical need to repeat the process.  However, a dummy has been entered for demonstration purpose.

answer; normative economics;