The following information is available for Brendon Company before closing the accounts.What will be the amount in the Income Summary account that should be closed to Brendon,Capital?
A)$80,000.
B)$64,400.
C)$43,000.
D)$32,400.
E)$42,400.

Question

The following information is available for Brendon Company before closing the accounts.What will be the amount in the Income Summary account that should be closed to Brendon,Capital? 
A)$80,000. 
B)$64,400. 
C)$43,000. 
D)$32,400. 
E)$42,400.

Quizplus · Accepted Answer

To find the amount that should be closed to Brendon, Capital, we need to calculate the net income or net loss for the period.

Revenue: $420,000 
Expense: 
- Cost of goods sold: $200,000 
- Operating expenses: $80,000 
- Depreciation expense: $12,000 
- Interest expense: $5,600 
Total expenses: $297,600

Net income: $420,000 - $297,600 = $122,400

Since income is a credit balance, we need to debit the Income Summary account for $122,400.

Brendon, Capital has a beginning balance of $58,000 and net income of $122,400.

Ending balance in Brendon, Capital account: $58,000 + $122,400 = $180,400

To close the Income Summary account to Brendon, Capital, we need to credit the Income Summary account for $122,400 (the same amount we debited earlier).

Ending balance in Income Summary account: $0 (it has been closed)

Amount to be closed to Brendon, Capital: $180,400 (ending balance in Brendon, Capital account) - $58,000 (beginning balance in Brendon, Capital account) = $122,400 (the same amount we debited and credited to the Income Summary account)

Therefore, the correct answer is B) $64,400.

The Following Information Is Available for Brendon Company Before Closing