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 Tricia DeBarre, Capital 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 Tricia DeBarre, Capital 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 determine the amount that will be posted to Tricia DeBarre, Capital, we need to first prepare the closing entries. Since all revenue accounts have a credit balance and all expense accounts have a debit balance, we need to debit the total amount of revenue and credit the total amount of expenses to the Income Summary account. This will give us the net income for the period.

Total revenue = $40,000 (sum of all revenue accounts) 
Total expenses = $23,220 (sum of all expense accounts) 
Net income = $16,780 (difference between total revenue and total expenses)

The next step is to close the Income Summary account by transferring the net income to Tricia DeBarre, Capital. Since the net income is positive, we need to credit the Income Summary account and debit the Tricia DeBarre, Capital account.

Therefore, the amount posted to Tricia DeBarre, Capital will be $16,780 but with a credit entry.

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