The F. Mercury, Capital account has a credit balance of $37,000 before closing entries are made. Total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000.
-What is the correct closing entry for the revenue accounts?
A) Debit Revenue accounts $55,200; credit Income Summary $55,200.
B) Debit Revenue accounts $55,200; credit F. Mercury, Capital $37,000.
C) Debit Revenue accounts $37,000; credit F. Mercury, Capital $37,000.
D) Debit Income Summary $55,200; credit Revenue accounts $55,200.
E) Debit Income Summary $37,000; credit F. Mercury Capital $37,000.

Question

The F. Mercury, Capital account has a credit balance of $37,000 before closing entries are made. Total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000. 
-What is the correct closing entry for the revenue accounts?
A) Debit Revenue accounts $55,200; credit Income Summary $55,200.
B) Debit Revenue accounts $55,200; credit F. Mercury, Capital $37,000.
C) Debit Revenue accounts $37,000; credit F. Mercury, Capital $37,000.
D) Debit Income Summary $55,200; credit Revenue accounts $55,200.
E) Debit Income Summary $37,000; credit F. Mercury Capital $37,000.

Quizplus · Accepted Answer

The correct closing entry for revenue accounts is to debit the revenue accounts for their total amount (which is $55,200 in this case) and credit the Income Summary for the same amount. This is because the revenue accounts have a credit balance and need to be zeroed out by transferring their balance to the Income Summary account. Once the revenue accounts have been closed, the Income Summary account can then be closed by transferring its balance to the owner's capital account.

The F Mercury, Capital Account Has a Credit Balance of $37,000