Question

The following items appear on the adjusted trial balance of Barker Company: Account Debit Credit Fees Earned $20,791 Rent Expense 4,000 Wages Expense 5,678 Dividends 340 Which of the following will be included in the second closing entry? a. Credit to Dividends for $340 b. Credit to Retained Earnings for $340 c. Credit to Retained Earnings for $20,791 d. Debit to Retained Earnings for $20,791

Answer 1

Explanation: In this case, the Dividends account has a balance of $340 on the adjusted trial balance. To close this account, we need to transfer the balance to the Retained Earnings account. Since Dividends is a debit account, we need to credit the Retained Earnings account to close it. Therefore, the second closing entry will include a credit to Retained Earnings for $340. The correct answer is: b. Credit to Retained Earnings for $340.