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, $45,000; credit Income Summary, $45,000
B) debit Income Summary, $141,000; credit Retained Earnings, $141,000
C) debit Income Summary, $45,000; credit Retained Earnings, $45,000
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, $45,000; credit Income Summary, $45,000 
B) debit Income Summary, $141,000; credit Retained Earnings, $141,000 
C) debit Income Summary, $45,000; credit Retained Earnings, $45,000 
D) debit Retained Earnings, $9,000; credit Income Summary, $9,000

Quizplus · Accepted Answer

The entry to close Income Summary would be to debit Income Summary for the amount of the net income ($45,000) and credit Retained Earnings for the same amount, since net income increases Retained Earnings. Therefore, the correct answer is debit Income Summary, $45,000; credit Retained Earnings, $45,000.

Use the Work Sheet for Finley Company to Answer the Questions