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Garg Employment Agency: closing and reversing entries

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** Please see the attached file for the full problem description **

On December 31, the adjusted trial balance of Garg Employment Agency shows the following
selected data.

Accounts Receivable 24,000 Commission Revenue 92,000
Interest Expense 7,800 Interest Payable 1,500

Analysis shows that adjusting entries were made to (1) accrue $4,200 of commission revenue
and (2) accrue $1,500 interest expense.

Instructions

(a) Prepare the closing entries for the temporary accounts at December 31.

Date Accounts and Explanations Debit Credit
Dec 31 Commission Revenue 92,000
Income Summary 92,000

Dec 31 Income Summary 9,300
Interest Expense 7,800
Interest Payable 1,500

(b) Prepare the reversing entries on January 1.

Date Accounts and Explanations Debit Credit
Jan 1 Interest Payable 1,500
Interest Expense 7,800
Jan 1 Accounts Payable 24,000
Interest Payable 1,500

(c) Post the entries in (a) and (b). Rule and balance the accounts. (Use T accounts.)

Accounts Receivable
Date Explanation Ref Debit Credit Balance
Dec 31 24,000 24,000
Dec 31 Closing 24,000 -

Interest Expense
Date Explanation Ref Debit Credit Balance
Dec 31 7,800 7,800
Dec 31 Closing 7,800 -

Commission Revenue
Date Explanation Ref Debit Credit Balance
Dec 31 92,000 92,000
Dec 31 Closing 92,000 -

Interest Payable
Date Explanation Ref Debit Credit Balance
Dec 31 1,500 1,500
Dec 31 Closing 1,500 -

(d) Prepare the entries to record (1) the collection of the accrued commissions on January 10
and (2) the payment of all interest due ($2,700) on January 15.

Commissions 92,000

(e) Post the entries in (d) to the temporary accounts.

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