Hot Tamale Company Had $120,000 of Revenues and $125,000 of Expenses

question 37

Essay

Hot Tamale Company had $120,000 of Revenues and $125,000 of Expenses. No dividends were paid. Please provide the first of the year-end closing entries.

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Definitions:

Modified Cash Basis

A method of accounting that combines elements of both cash and accrual accounting, recording most transactions on a cash basis, but also incorporating the accrual basis for significant items.

Warranty Expense

Costs associated with the obligation to repair or replace defective products sold to customers, recognized as a liability.

Estimated Liability

A probable future outflow of resources, arising from past transactions or events, the amount of which is not certain.

Cash Discounts

A reduction in invoice amount offered by sellers to buyers as an incentive for early payment.