Use the work sheet for Finley Company to answer the questions that follow. The entry to close Income Summary would be
A) debit Retained Earnings, $50,000; credit Income Summary, $50,000
B) debit Income Summary, $155,000; credit Retained Earnings, $155,000
C) debit Income Summary, $50,000; credit Retained Earnings, $50,000
D) debit Retained Earnings, $9,000; credit Income Summary, $9,000

Question

Use the work sheet for Finley Company to answer the questions that follow.   The entry to close Income Summary would be
A) debit Retained Earnings, $50,000; credit Income Summary, $50,000 
B) debit Income Summary, $155,000; credit Retained Earnings, $155,000 
C) debit Income Summary, $50,000; credit Retained Earnings, $50,000 
D) debit Retained Earnings, $9,000; credit Income Summary, $9,000

Quizplus · Accepted Answer

According to the worksheet, the balance in the Income Summary account is a credit of $50,000. To close the Income Summary account and transfer the balance to Retained Earnings, we need to debit Income Summary for $50,000 and credit Retained Earnings for the same amount. Therefore, the correct entry to close Income Summary would be debit Income Summary, $50,000; credit Retained Earnings, $50,000. Choice A and Choice B are incorrect because they involve debiting or crediting incorrect amounts. Choice D is incorrect because it involves debiting Retained Earnings, which is not necessary to close the Income Summary account.

Use the Work Sheet for Finley Company to Answer the Questions