(Learning Objective 5: Making closing entries and evaluating retained earnings) The accounts of Cookie Lapp eTravel, Inc., at December 31, 20X5, are listed in alphabetical order.

Accounts payable

$ 5,100

Note payable, long-term

$10,600

Accounts receivable

800

Other assets

3,600

Accumulated depreciation furniture

6,600

Retained earnings, December 31, 20X4

7,700

Interest expense

11,600

Supplies

93,500

Advertising expense

2,200

Service revenue

5,300

Cash

7,300

Salary expense

24,600

Common stock

15,000

Salary payable

3,900

Depreciation expense

1,300

Supplies expense

5,700

Dividends

47,400

Unearned service revenue

3,600

Furniture

41,400

Required

1. All adjustments have been journalized and posted, but the closing entries have not yet been made. Journalize Lapp’s closing entries at December 31, 20X5.

2. Set up a T-account for Retained Earnings and post to that account. Then compute Lapp’s net income for 20X5. What is the ending balance of Retained Earnings?

3. Did Retained Earnings increase or decrease during the year? What caused the increase or decrease?