An adjusted trial balance for a sole proprietorship is given below.There were no new capital contributions during the year. $$\begin{array} { | l | r | r | }
\hline & { \text { Debit } } & \text { Credit } \
\hline \text { Cash } & \$ 14,000 & \
\hline \text { Accounts Receivable } & 5,000 & \
\hline \text { Prepaid Rent } & 800 & \
\hline \text { Merchandise Inventory } & 26,000 & \
\hline \text { Accounts Payable } & & \$ 4,200 \
\hline \text { Salaries Payable } & & 1,500 \
\hline \text { Notes Payable } & & 600 \
\hline \text { Lorenzo, Capital } & &8,000 \
\hline \text { Lorenzo, Withdrawals } &1,000 & \
\hline \text { Sales Revenue } & & 98,500\
\hline \text { Cost of Goods Sold } & 23,000& \
\hline \text { Salaries Expense } & 19,000 & \
\hline \text { Rent Expense } & 15,000 & \
\hline \text { Selling Expense } & 8,400 & \
\hline \text { Supplies Expense } & \underline { 600 }\
\hline \text { Total } & \$ 112,800 & \$ 112,800 \
\hline
\end{array}$$ What will be the final balance in the company's Lorenzo,Capital account after recording the closing
Entries?
A) $39,500
B) $40,500
C) $31,000
D) $7,000

Question

An adjusted trial balance for a sole proprietorship is given below.There were no new capital contributions during the year. $$\begin{array} { | l | r | r | } 
\hline &  { \text { Debit } } & \text { Credit } \
\hline \text { Cash } & \$ 14,000 & \
\hline \text { Accounts Receivable } & 5,000 & \
\hline \text { Prepaid Rent } & 800 & \
\hline \text { Merchandise Inventory } & 26,000 & \
\hline \text { Accounts Payable } & & \$ 4,200 \
\hline \text { Salaries Payable } & & 1,500 \
\hline \text { Notes Payable } & & 600 \
\hline \text { Lorenzo, Capital } &  &8,000 \
\hline \text { Lorenzo, Withdrawals } &1,000 &  \
\hline \text { Sales Revenue } &  & 98,500\
\hline \text { Cost of Goods Sold } & 23,000& \
\hline \text { Salaries Expense } & 19,000 & \
\hline \text { Rent Expense } & 15,000 & \
\hline \text { Selling Expense } & 8,400 & \
\hline \text { Supplies Expense } &  \underline { 600 }\
\hline \text { Total } & \$ 112,800 & \$ 112,800  \
\hline
\end{array}$$ What will be the final balance in the company's Lorenzo,Capital account after recording the closing
Entries?
A) $39,500
B) $40,500
C) $31,000
D) $7,000

Quizplus · Accepted Answer

To find the final balance in the Lorenzo, Capital account after closing entries, we first calculate the net income and then adjust the capital account for withdrawals and net income. Net income is calculated as follows: Sales Revenue - (Cost of Goods Sold + Salaries Expense + Rent Expense + Selling Expense + Supplies Expense) = $98,500 - ($23,000 + $19,000 + $15,000 + $8,400 + $600) = $98,500 - $66,000 = $32,500. The initial balance in the Lorenzo, Capital account is $8,000. We add the net income of $32,500 and subtract withdrawals of $1,000. Thus, the final balance is $8,000 + $32,500 - $1,000 = $39,500.

An Adjusted Trial Balance for a Sole Proprietorship Is Given