During Year 5,Magellan Corporation earned net income of $32,000 and paid cash dividends of $8,500 to its stockholders.Which of the following choices reflects the effect of closing entries on the company's financial statements?
A)The income statement will report net income of $23,500 after the closing entries have been posted to the ledger accounts.
B)The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts.
C)The balance sheet will report retained earnings of $32,000 after the closing entries have been posted to the ledger accounts.
D)The amounts reported on the financial statements will not be affected by the closing entries.

Question

Quizplus · Accepted Answer

Closing entries are recorded after financial statements have been prepared.Therefore,they do not have any effect on the financial statements.The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts only if this is the company's first year of operations.

During Year 5,Magellan Corporation Earned Net Income of $32,000 and Paid