The owner's Capital,Withdrawals,and Income Summary accounts for Laurel Repair Company for the accounting period are presented below in T account form after the recording and posting of closing entries: The amount of net income (or net loss)for the period is
A)$400 net loss.
B)$500 net income.
C)$900 net income.
D)$400 net income.

Question

The owner's Capital,Withdrawals,and Income Summary accounts for Laurel Repair Company for the accounting period are presented below in T account form after the recording and posting of closing entries:  The amount of net income (or net loss)for the period is
A)$400 net loss. 
B)$500 net income. 
C)$900 net income. 
D)$400 net income.

Quizplus · Accepted Answer

The owner's Capital account has a balance of $28,000 at the beginning of the period and $29,400 at the end of the period, indicating an increase of $1,400. This increase in the owner's equity is due to the net income earned during the period. 
The Income Summary account has a credit balance of $1,400, which represents the total revenues for the period. The Expenses account has a total debit balance of $500, indicating the total expenses for the period. 
Therefore, the net income for the period can be calculated as follows: 
Net income = Total revenues - Total expenses 
Net income = $1,400 - $500 
Net income = $900 
Thus, the correct answer is D, $400 net income.

The Owner's Capital,Withdrawals,and Income Summary Accounts for Laurel Repair Company