A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below.What amount will be posted to Retained earnings in the process of closing the Income Summary account? (Assume all accounts have normal balances.)
$$\begin{array} { l r }
\text { Retained earnings } &\$ 7,000 \
\text { Dividends } & 9,600 \
\text { Revenus } & 29,000 \
\text { Rent expense } & 3,600 \
\text { Salaries expense } & 7,200 \
\text { Insurance expense } & 920 \
\text { Depr. Experise-equipment } & 500 \
\text { Accum depr.-equiprnent } & 1,500
\end{array}$$
A) $16,780 debit.
B) $7,180 credit.
C) $16,780 credit.
D) $18,280 credit.
E) $23,780 credit.

Question

A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below.What amount will be posted to Retained earnings in the process of closing the Income Summary account? (Assume all accounts have normal balances.)
$$\begin{array} { l r } 
\text { Retained earnings } &\$ 7,000 \
\text { Dividends } & 9,600 \
\text { Revenus } & 29,000 \
\text { Rent expense } & 3,600 \
\text { Salaries expense } & 7,200 \
\text { Insurance expense } & 920 \
\text { Depr. Experise-equipment } & 500 \
\text { Accum depr.-equiprnent } & 1,500
\end{array}$$
A) $16,780 debit.
B) $7,180 credit.
C) $16,780 credit.
D) $18,280 credit.
E) $23,780 credit.

Quizplus · Accepted Answer

To determine the amount posted to Retained Earnings from closing the Income Summary account, calculate the net income and adjust for dividends. Net income is Revenues minus Expenses. Revenues are $29,000. Total Expenses are $3,600 (Rent) + $7,200 (Salaries) + $920 (Insurance) + $500 (Depreciation) = $12,220. Net Income = $29,000 - $12,220 = $16,780. The Dividends of $9,600 are a reduction to Retained Earnings but are not part of the Income Summary account. Therefore, $16,780 (Net Income) is credited to Retained Earnings.

A Company's Ledger Accounts and Their End-Of-Period Balances Before Closing