The Retained earnings account has a credit balance of $37,000 before closing entries are made.Total revenues for the period are $55,200,total expenses are $39,800,and dividends are $9,000.What is the correct closing entry for the revenue accounts?
A)Debit Income Summary $55,200; credit Revenue accounts $55,200.
B)Debit Revenue accounts $37,000; credit Retained earnings $37,000.
C)Debit Revenue accounts $55,200; credit Retained earnings $37,000.
D)Debit Revenue accounts $55,200; credit Income Summary $55,200.
E)Debit Income Summary $37,000; credit Retained earnings $37,000.

Question

Quizplus · Accepted Answer

The correct closing entry for revenue accounts is to debit the revenue accounts for their total amount of $55,200 and credit the Income Summary account for the same amount. This entry transfers the revenue for the period to the Income Summary account. Then, the Income Summary account will be closed to Retained Earnings with a debit for $16,400 ($55,200 - $39,800 - $9,000), which represents the net income for the period. Therefore, the Retained Earnings account will be credited for the same amount, increasing its balance from $37,000 to $53,400 ($37,000 + $16,400).

The Retained Earnings Account Has a Credit Balance of $37,000