Question

Primorsk is a global specialized staffing firm. Information adapted from the statement of earnings (in thousands, without earnings per share information) in its annual report for the year ended December 31, 2014, follows. The firm reported distributing cash (dividends) in the amount of $95,562,000 to the owners in 2014.
Revenues
Service revenues ................ $ 6,676,878
Interest income ................ 21,896
Total revenues ................. $ 6,698,774
Expenses
Employee compensation and benefits ......$ 3,930,780
Selling, general, and administrative expenses ... 1,983,646
Income taxes................. 308,608
Total expenses ................ $ 6,223,034
Net income.................. $ 475,740

Required
1. Prepare the closing entries Primorsk would have made on December 31, 2014. Treat income taxes as an expense and cash distributions to owners as withdrawals.
2. Based on your handling of requirement 1 and the effect of expenses and cash distributions on owner’s capital, what theoretical reason can you give for not including expenses and cash distributions in the same closing entry?



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  • CreatedMarch 26, 2014
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