Seminoles Corporation’s fiscal year-end is December 31,...

Seminoles Corporation’s fiscal year-end is December 31, 2018. The following is a partial adjusted trial balance as of December 31.Required: $$ \begin{array}{|c|c|c|} \hline \text { Accounts } & \text { Debit } & \text { Credit } \\ \hline \text { Retained Earnings } & & \$ 30,000 \\ \hline \text { Dividends } & \$ 3,000 & \\ \hline \text { Service Revenue } & & 50,000 \\ \hline \text { Interest Revenue } & & 6,000 \\ \hline \text { Salaries Expense } & 15,000 & \\ \hline \text { Rent Expense } & 6,000 & \\ \hline \text { Advertising Expense } & 3,000 & \\ \hline \begin{array}{l} \text { Depreciation } \\ \text { Expense } \end{array} & 11,000 & \\ \hline \text { Interest Expense } & 5,000 & \\ \hline \end{array} $$ 1. Prepare the necessary closing entries. 2. Calculate the ending balance of Retained Earnings.

Seminoles Corporation’s fiscal year-end is December 31, 2018. The following is a partial adjusted trial balance as of December 31.Required:
$$
\begin{array}{|c|c|c|}
\hline \text { Accounts } & \text { Debit } & \text { Credit } \\
\hline \text { Retained Earnings } & & \$ 30,000 \\
\hline \text { Dividends } & \$ 3,000 & \\
\hline \text { Service Revenue } & & 50,000 \\
\hline \text { Interest Revenue } & & 6,000 \\
\hline \text { Salaries Expense } & 15,000 & \\
\hline \text { Rent Expense } & 6,000 & \\
\hline \text { Advertising Expense } & 3,000 & \\
\hline \begin{array}{l}
\text { Depreciation } \\
\text { Expense }
\end{array} & 11,000 & \\
\hline \text { Interest Expense } & 5,000 & \\
\hline
\end{array}
$$

1. Prepare the necessary closing entries.
2. Calculate the ending balance of Retained Earnings.

Key Concepts

Retained Earnings

Retained earnings represent the cumulative net income of a company that has been retained within the business, rather than distributed to shareholders as dividends. It is updated by adding net income and subtracting dividends for the period, and it reflects a company’s ability to reinvest or meet long-term obligations.

Income Summary

The income summary is a temporary intermediary account used during the closing process. It collects all revenue and expense account balances at the end of an accounting period, and its net balance, which represents the period’s net income or loss, is then transferred to the retained earnings account.

Temporary Accounts

Temporary accounts include revenues, expenses, gains, losses, and dividends that are used to record financial transactions within a specific period. Since these accounts are meant to capture data for a single period, they are closed at the end of the period to avoid carrying their balances forward, ensuring that only current period activities are reported in the new period.

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer the balances of temporary or nominal accounts, such as revenues, expenses, and dividends, to permanent accounts. This process resets the temporary account balances to zero in preparation for the next accounting period and accurately reflects the company's financial results in its permanent equity accounts.

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