Cookie Creations 14 Part Level Submission After establishing

Cookie Creations 14 (Part Level Submission) After establishing their company\'s fiscal year-end to be October 31, Natalie and Curtis begin operating Cookie & Coffee Creations Inc. on November 1, 2017. On that date, after the issuance of shares, the paid-in capital section of the company\'s balance sheet is as follows. Paid-in capital Preferred stock, $0.50 noncumulative, no par value, 10,000 shares authorized, 2,000 issued Common stock, no par value, 100,000 shares $10,000 authorized, 25,930 issued 25,930 Cookie & Coffee Creations then has the following selected transactions during its first year of operations. Dec. 1 Issues an additional 800 preferred shares to Natalie\'s brother for $4,000. Apr. 30 Declares a semiannual dividend to the preferred stockholders of record on May 15, payable on June 1 June 30 Repurchases 750 shares of common stock issued to the lawyer, for $500. Recall that these were originally issued for $750. The lawyer had decided to retire and wanted to liquidate all of her assets Oct. 31 The company has had a very successful first year of operations. It earned revenues of $462,500 and incurred operating expenses of $370,000 (including $750 legal fee, but excluding income tax) 31 Records income tax expense. (The company has a 20% income tax rate.) 31 Declares a semiannual dividend to the preferred stockholders of record on November 15, payable on December 1

Solution

Prepare closing entries :

388500

Date	accounts & explanation	debit	credit
Oct 31	Sales revenue a/c	462500
	Income summary a/c		462500
	(To record close of revenue account)
Oct 31	Income summary a/c	388500
	Operating expenses		370000
	Income tax expense		18500
	(To record close of expenses account)
Oct 31	Income summary a/c	74000
	Retained earnings		74000
	(To record close net income)