A company had $80 000 of Sales revenue and $75 000 of Expenses. Which of the following would be the third of three year- end closing entries? (Assume no dividends were paid.)
A)Debit Income summary $5 000 and credit Retained earnings $5 000.
B)Debit Revenues $80 000 and credit Income summary $80 000.
C)Debit Expenses $75 000 and credit Income summary $75 000.
D)Debit Income summary $75 000 and credit Expenses $75 000.

Question

Quizplus · Accepted Answer

The third closing entry is to close the Income Summary account to Retained Earnings. The Income Summary account has a debit balance of $5,000, which represents the net income for the year. The Retained Earnings account is credited for $5,000, which increases the balance of retained earnings by the amount of net income.

A Company Had $80 000 of Sales Revenue and $75