Frosty Inc.has the following balances on December 31 prior to closing entries: Based upon the balances above,what net adjustment would be made to Retained Earnings due to closing entries?
$$\begin{array} { | l | r | }
\hline \text { Revenues } & \$ 36,000 \
\hline \text { Retained Earnings, Jan. } 1 & 10,000 \
\hline \text { Cash } & 7,000 \
\hline \text { Expenses } & 23,000 \
\text { Accounts Payable } & 4,000 \
\hline \text { Dividends } & 1,000 \
\hline \text { Supplies } & 18,000 \
\hline
\end{array}$$
A)Increase of $11,000.
B)Increase of $13,000.
C)Increase of $12,000.

Question

Frosty Inc.has the following balances on December 31 prior to closing entries: Based upon the balances above,what net adjustment would be made to Retained Earnings due to closing entries?
$$\begin{array} { | l | r | } 
\hline \text { Revenues } & \$ 36,000 \
\hline \text { Retained Earnings, Jan. } 1 & 10,000 \
\hline \text { Cash } & 7,000 \
\hline \text { Expenses } & 23,000 \
\text { Accounts Payable } & 4,000 \
\hline \text { Dividends } & 1,000 \
\hline \text { Supplies } & 18,000 \
\hline
\end{array}$$
A)Increase of $11,000.
B)Increase of $13,000.
C)Increase of $12,000.

Quizplus · Accepted Answer

Net income is $13,000 ($36,000-$23,000). Closing entries will transfer this amount to Retained Earnings, increasing it by $13,000.

Frosty Inc A)Increase of $11,000