What effect will the following entry have on Retained Earnings?
A)Retained Earnings will remain unchanged.
B)Retained Earnings will decrease by $2,550.
C)Retained Earnings will increase by $2,550.
D)Retained Earnings will be transferred to the income statement.

Question

What effect will the following entry have on Retained Earnings? 
A)Retained Earnings will remain unchanged. 
B)Retained Earnings will decrease by $2,550. 
C)Retained Earnings will increase by $2,550. 
D)Retained Earnings will be transferred to the income statement.

Quizplus · Accepted Answer

The entry will increase Retained Earnings by $2,550. This entry represents a credit to the company's revenue account, which will increase net income for the period. When net income increases, Retained Earnings increases as well, since Retained Earnings includes all accumulated profits and losses from prior periods.

What Effect Will the Following Entry Have on Retained Earnings