Question

The income statement for the year 2013 of Fugazi Co. contains the following information:

Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 8,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense
2,000
Total expenses
75,500
Net income (loss)
($5,500)

At January 1, 2013, Fugazi reported retained earnings of $50,000. Dividends for the year totalled $10,000. At December 31, 2013, the company will report retained earning of



$15,500.

$34,500.

$40,000.

$45,500



QUESTION 2 (USE SAME DATA AS GIVEN ABOVE):

After all closing entries have been posted, the Income Summary account will have a balance of


$0.

$5,500 debit.

$5,500 credit.

$34,500 credit.




QUESTION 3:

The entry to close Income Summary to Retained Earnings includes


credits to Expenses totalling $75,500.

a credit to Income Summary for $5,500.

a credit to Retained Earning for $5,500.

a debit to Revenue

Answer 1

Step-by-step explanation:

1. The computation of the ending retained earning balance is shown below:

The ending balance of retained earning = Beginning balance of retained earnings (+ net income /- net loss) - dividend paid

= $50,000 - $5,500 - $10,000

= $34,500

2. The Net income would be zero As the debit side total is $75,500 which indicates total expenses whereas the credit side would be revenues + loss = $70,000 + $5,500 = $75,500

3. The journal entry is shown below:

Income summary A/c Dr $5,500

To Retained earning $5,500

(Being the difference is credited to retained earning)