Question

Tiptoe shoes had annual revenues of $201,000, expenses of $111,700, and dividends of $24,400 during the current year. the retained earnings account before closing had a balance of $313,000. the entry to close the income summary account at the end of the year, after revenue and expense accounts have been closed, is:

Answer 1

Entry to close the income summary account at the end of the year:

At the time of closing the Income Summary account, the Income Summary account is debited and Retained earnings account is credit with the amount of Net Income. Net Income can be calculated as follows:

Net income = Revenue – Expenses = 201,000-111,700 = $89,300

Hence the entry to close the income summary account at the end of the year shall be as follows;

Income Summary Debit $89,300

Retained earnings Credit $89,300