Questions: On January 1, 2026, Red Flash Photography had the following balances: Cash, 21,000; Supplies, 8,900; Land, 69,000; Deferred Revenue, 5,900; Common Stock 59,000; and Retained Earnings, 34,000. During 2026, the company had the following transactions: February 15 Issue additional shares of common stock, 29,000. May 20 Provide services to customers for cash, 44,000, and on account, 39,000. August 31 Pay salaries to employees for work in 2026, 32,000. October 1 Purchase rental space for 1 year, 21,000. November 17 Purchase supplies on account, 31,000. December 30 Pay dividends, 2,900. The following information is available on December 31, 2026: 1. Employees are owed an additional 4,900 in salaries. 2. Three months of the rental space have expired. 3. Supplies of 5,900 remain on hand. 4. All of the services associated with the beginning deferred revenue have been performed. 5. Prepare closing entries.

To address the question, we need to prepare the closing entries for Red Flash Photography for the year ending December 31, 2026. Closing entries are used to transfer the balances of temporary accounts (revenues, expenses, and dividends) to permanent accounts (Retained Earnings). Let's go through the transactions and adjustments step by step:

1. Service Revenue:

   • Total service revenue for the year is the sum of cash and on-account services: $44,000 + $39,000 = $83,000$.
   • Closing entry: Debit Service Revenue $83,000; Credit Retained Earnings $83,000.

2. Deferred Revenue:

   • All services associated with the beginning deferred revenue of $5,900 have been performed.
   • Closing entry: Debit Deferred Revenue $5,900; Credit Service Revenue $5,900.

3. Salaries Payable:

   • Salaries paid during the year: $32,000.
   • Additional salaries owed: $4,900.
   • Total salary expense for the year: $32,000 + $4,900 = $36,900.
   • Closing entry: Debit Retained Earnings $36,900; Credit Salaries Expense $36,900.

4. Supplies:

   • Supplies purchased during the year: $31,000.
   • Supplies remaining at year-end: $5,900.
   • Supplies used: $8,900 (beginning) + $31,000 (purchased) - $5,900 (remaining) = $34,000.
   • Closing entry: Debit Retained Earnings $34,000; Credit Supplies Expense $34,000.

5. Prepaid Rent:

   • Rent paid for one year on October 1: $21,000.
   • Three months of rent have expired: $21,000 / 12 months * 3 months = $5,250.
   • Closing entry: Debit Retained Earnings $5,250; Credit Rent Expense $5,250.

6. Dividends:

   • Dividends paid during the year: $2,900.
   • Closing entry: Debit Retained Earnings $2,900; Credit Dividends $2,900.

Now, let's summarize the closing entries in the journal format:

\[ \begin{array}{|c|c|c|c|c|c|} \hline \text{No} & \text{Date} & \multicolumn{2}{|c|}{\text{General Journal}} & \text{Debit} & \text{Credit} \\ \hline 1 & \text{December 31, 2026} & \text{Service Revenue} & & \$83,000 & \\ & & & \text{Retained Earnings} & & \$83,000 \\ \hline 2 & \text{December 31, 2026} & \text{Deferred Revenue} & & \$5,900 & \\ & & & \text{Service Revenue} & & \$5,900 \\ \hline 3 & \text{December 31, 2026} & \text{Retained Earnings} & & \$36,900 & \\ & & & \text{Salaries Expense} & & \$36,900 \\ \hline 4 & \text{December 31, 2026} & \text{Retained Earnings} & & \$34,000 & \\ & & & \text{Supplies Expense} & & \$34,000 \\ \hline 5 & \text{December 31, 2026} & \text{Retained Earnings} & & \$5,250 & \\ & & & \text{Rent Expense} & & \$5,250 \\ \hline 6 & \text{December 31, 2026} & \text{Retained Earnings} & & \$2,900 & \\ & & & \text{Dividends} & & \$2,900 \\ \hline \end{array} \]

These entries close out the temporary accounts and update the Retained Earnings account for the year.