Use this information from the Income Statement columns of the work sheet of Oneida Landscape Service to answer the following question. The entry to close Income Summary would be
A) Income Summary 5,000 Retained Earnings 5,000
B) Common Stock 1,400 Income Summary 1,400
C) Income Summary 1,400 Retained Earnings 1,400
D) Income Summary 1,400 Common Stock 1,400

Question

Use this information from the Income Statement columns of the work sheet of Oneida Landscape Service to answer the following question.  The entry to close Income Summary would be
A) Income Summary 5,000 Retained Earnings 5,000 
B) Common Stock 1,400 Income Summary 1,400 
C) Income Summary 1,400 Retained Earnings 1,400 
D) Income Summary 1,400 Common Stock 1,400

Quizplus · Accepted Answer

The purpose of closing Income Summary is to transfer the net income or loss from the temporary account to the permanent account (Retained Earnings). In this case, the company has a net income of $1,400. Therefore, the correct entry to close Income Summary would be to credit Income Summary for $1,400 and debit Retained Earnings for $1,400. Choice A and D are incorrect because they do not transfer the amount to Retained Earnings, which is the permanent account for recording net income or loss. Choice B is incorrect because it involves Common Stock which is not related to the closing process of income and expense accounts.

Use This Information from the Income Statement Columns of the Work