G The December 31, 2021, adjusted trial balance for the Blueboy Cheese Corporation is presented below. Account Title Debits Credits Cash 41,500 Accounts receivable 305,000 Prepaid rent 10,500 Inventory 45,000 Office equipment 550,000 Accumulated depreciation 230,000 Accounts payable 62,000 Notes payable (due in six months) 45,000 Salaries payable 7,000 Interest payable 1,500 Common stock 400,000 Retained earnings 125,000 Sales revenue 700,000 Cost of goods sold 420,000 Salaries expense 105,000 Rent expense 31,500 Depreciation expense 55,000 Interest expense 3,000 Advertising expense 4,000 Totals 1,570,500 1,570,500 Required: 1-a. Prepare an income statement for the year ended December 31, 2021. 1-b. Prepare a classified balance sheet as of December 31, 2021. 2. Prepare the necessary closing entries at December 31, 2021.

Check the explanation

Explanation:

The right choice is Income summary account, since that is not in the account, closing entries can be in the following ways,

Alternative 1, one combined entry with balancing figure as retained earnings,

DateGeneral Journal      Debit         Credit

Dec 31Sales revenue   $7,60,000  

Cost of goods sold                                     $4,56,000

Salaries expense                                          $1,14,000

Rent expense                                                 $40,500

Depreciation expense                                   $62,000

Interest expense                                             $4,400

Advertising expense                                      $5,400

Retained Earnings                                          $77,700

Alternative 2, Transfer of Revenue and expenses separately to Retained Earnings

DateGeneral Journal           Debit                   Credit

Dec 31Sales revenue        $7,60,000  

Retained Earnings                                                $7,60,000

Dec 31Retained Earnings    $6,82,300  

Cost of goods sold                                               $4,56,000

Salaries expense                                                    $1,14,000

Rent expense                                                          $40,500

Depreciation expense                                            $62,000

Interest expense                                                    $4,400

Advertising expense                                             $5,400