Financial Statement Case

This case uses both the income statement (statement of operations) and the balance sheet of the

2009 Amazon.com Financial Statements handout. It will help you understand the closing

process of a business.

Requirements

R1. Journalize Amazon.com%u2019s closing entries for the revenues and expenses of 2009. Show all

amounts in millions as in the Amazon financial statements. You may be unfamiliar with certain

revenues and expenses, but treat each item on the income statement as either a revenue or an

expense. For example, Net sales is the first revenue item. Other items you may be unfamiliar with

are as follows: "Other operating expense (income), net" is shown in parentheses, so it should be

treated as revenue. "Interest Income" should be treated as revenue. Although the amount shown

for "Interest expense" is in parentheses, you may ignore those parentheses for this purpose and treat

it similarly to other expenses. "Other income (expense), net" is shown as a positive number, so it should be

treated as revenue.The "provision for income taxes" should be treated as an expense. "Equity method

investment activity, net of tax" is shown in parentheses, so it should be shown as an expense. In your

closing entries, ignore all subtotals such as Gross profit, Total operating expenses, Income from operations,

Total non-operating income (expense), and Net income (loss).

R2. Create a T-account for the Income summary, post to that account, and then close the Income summary.

(Note: Use the Retained earnings account to replace the Capital account in your entries.) How much was

closed to Retained earnings? How is the amount that was closed to Retained earnings labeled on the income statement