A business has beginning Capital of $100,000.During the year,Sales revenues were $20,000,Sales returns and allowances were $300,Sales discounts were $700,Cost of goods sold were $12,000,and all other expenses totaled $4,500.$1,000 of withdrawals were taken.The fourth closing entry would include which of the following line items?
A) Debit to Income summary of $1,000
B) Credit to Income summary of $1,000
C) Debit to Capital of $1,000
D) Debit to Capital of $16,500

Question

Quizplus · Accepted Answer

The fourth closing entry is to transfer the net income or loss to the Capital account. In this case, the business has a net income of $2,700 ($20,000 - $300 - $700 - $12,000 - $4,500 = $2,700) and the owner withdrew $1,000. Therefore, the fourth closing entry should include a debit to Capital of $1,700 ($2,700 - $1,000 = $1,700). Option C is the only choice that includes a debit to Capital for $1,000, which is the correct amount for the withdrawal.

A Business Has Beginning Capital of $100,000