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.)
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.) 
A)$16,780 debit. 
B)$7,180 credit. 
C)$16,780 credit. 
D)$18,280 credit. 
E)$23,780 credit.

Quizplus · Accepted Answer

To find the amount that will be posted to Retained Earnings in the process of closing the Income Summary account, we need to first determine the balance of the Income Summary account.

We can do this by adding up the revenues and subtracting the expenses:
Revenue - Expenses = $35,460 - $18,680 = $16,780 (credit balance)

The balance of the Income Summary account represents the net income for the period, so we need to transfer this amount to Retained Earnings. Since the balance of Income Summary is a credit, we will debit it to zero out the account, and credit an equal amount to Retained Earnings.

Therefore, the entry to close the Income Summary account will be:
Income Summary $16,780 (debit)
Retained Earnings $16,780 (credit)

So, the amount posted to Retained Earnings will be $16,780 (credit). Thus, the correct answer is C.

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