Chaptor 5 The Accounting Cycle: Reporting Financial Results Refer to the adjusted trial balance of Tutors for Rent, Inc., illustrated in Exercise 5.2 to respond to the following items: a. Prepare all necessary closing entries at December 31,2011. b. Prepare an after-closing trial balance dated December 31,2011. c.Compare the Retained Earnings balance reported in the after-closing trial balance prepared in part b to the balance reported in the adjusted trial balance. Explain why the two balances are different. (Include in your explanation why the balance reported in the after-closing trial bal- ance has increased or decreased subsequent to the closing process.) Refer to the adjusted trial balance of Wilderness Guide Services, Inc., illustrated in Exercise 5.3 to respond to the following items:

a. Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts (revenue, expense, and dividends) to permanent accounts (Retained Earnings). The closing process involves the following steps:<br /><br />1. Close revenue accounts: Debit each revenue account and credit Income Summary.<br />2. Close expense accounts: Credit each expense account and debit Income Summary.<br />3. Close Income Summary to Retained Earnings: If Income Summary has a credit balance (net income), debit Income Summary and credit Retained Earnings. If it has a debit balance (net loss), debit Retained Earnings and credit Income Summary.<br />4. Close dividends to Retained Earnings: Debit Retained Earnings and credit Dividends.<br /><br />b. An after-closing trial balance is prepared to ensure that all temporary accounts have been closed and that the ledger is ready for the next accounting period. It includes only permanent accounts.<br /><br />c. The difference in the Retained Earnings balance between the adjusted trial balance and the after-closing trial balance is due to the closing process. The closing process transfers the net income or net loss and dividends to Retained Earnings. If the company earned a net income during the period, the Retained Earnings balance will increase. If the company incurred a net loss, the Retained Earnings balance will decrease. Dividends paid during the period will also decrease the Retained Earnings balance.