The Income Summary account has an $8,000 credit balance prior to being closed to the owner's Capital account. The owner's Capital account had a $32,000 beginning balance and a $36,500 ending balance. Determine the amount of the owner's drawing during the current period.
A) $8,500
B) $3,500
C) $2,500
D) $4,500
E) $8,000

Question

Quizplus · Accepted Answer

The Income Summary account is closed to the owner's Capital account in order to transfer the net income or loss for the period to the owner's equity account. Since the Income Summary account has a credit balance of $8,000, it means there is a net income of $8,000 for the period. 
To determine the owner's drawing, we need to use the formula:
Owner's Drawing = Beginning Capital + Net Income - Ending Capital
Owner's Drawing = $32,000 + $8,000 - $36,500
Owner's Drawing = $3,500 
Therefore, the answer is B ($3,500).

The Income Summary Account Has an $8,000 Credit Balance Prior