If sales are $540,000,expenses are $440,000 and dividends are $50,000,Income Summary:

Question

Quizplus · Accepted Answer

To calculate the income summary, we need to subtract the total expenses from the sales revenue.

Sales revenue - expenses = net income (or loss)

$540,000 - $440,000 = $100,000

Since dividends are paid out of retained earnings, we subtract them from the net income (or add them if they are not paid out yet).

$100,000 - $50,000 = $50,000

Therefore, the income summary will have a credit balance of $50,000.

Option D is the correct answer.

If Sales Are $540,000,expenses Are $440,000 and Dividends Are $50,000,Income