Final Answer:
The effect of closing revenues and expenses to retained earnings will be to increase by $19,577. Thus, correct answer is option A. increase retained earnings by $19,577.
Step-by-step explanation:
Closing revenues and expenses to retained earnings is a process carried out at the end of an accounting period to update the equity section of the balance sheet. In this case, we can calculate the change in retained earnings by subtracting total expenses from total revenues.
Net Income = Total Revenues -Total Expenses
Net Income = $52,166 - $32,589
Net Income = $19,577
This net income is then added to the beginning retained earnings to get the ending retained earnings:
Ending Retained Earnings = Beginning Retained Earnings+ Net Income
Ending Retained Earnings = $1,423 + $19,577
Ending Retained Earnings = $21,000
The increase in retained earnings is $21,000 - $1,423 = $19,577, confirming the correct answer is Option A. This adjustment reflects the cumulative profits retained in the business after accounting for all revenues and expenses.
Full Question: