Reference no: EM132562407

Question - James and Susan Morley recently converted a large turn-of-the-century house into a hotel and incorporated the business as Nanaimo Enterprises. Their accountant is inexperienced and has made the following closing entries at the end of Nanaimo's first year of operations:

Income Summary 214,000 Service Revenue 181,000 Accumulated Depreciation 33,000

Depreciation Expense 33,000 Income Tax Expense 8,200 Utilities Expense 12,700 Wages Expense 66,000 Supplies Expense 31,000 Accounts Payable 4,500 Income Summary 155,400

Income Summary 58,600 Retained Earnings 58,600

Dividends Declared 3,200 Income Summary 3,200

What is wrong with the closing entries above by preparing the correct closing entries?