At April 1, 2022, Spiderland Company Reported a Balance of $20,000

question 98

Essay

At April 1, 2022, Spiderland Company reported a balance of $20,000 in the Owner's Capital account. Spiderland Company earned revenues of $50,000 and incurred expenses of $32,000 during April 2022. The company had owner drawings of $10,000 during the month.
(a) Prepare the entries to close Income Summary and the Owner's Drawings account at April 30, 2022.
(b) What is the balance in Owner's Capital on the April 30, 2022, post-closing trial balance?

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Definitions:

Allowance Method

The allowance method is an accounting technique that enables companies to anticipate and adjust for expected bad debts or credit losses in their financial statements.

Direct Write-off Method

Accounting practice where uncollected receivables are directly written off against income when deemed uncollectible, without using an allowance account.

Bad Debt Expense

A financial accounting concept representing the amount of uncollectible accounts receivable that a company expects to write off as a loss.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that may not be collectible, reflecting potential losses.