Question

Given the following accounts and their adjusted balances before closing entries are posted, what amount will be posted to Bessie Cool, Capital in the process of closing the Income Summary account? Assume all accounts have normal balances. Capital $7000 Withdrawals $9600 Revenue $ 30,500 Rent expence $3600 Salaries expence $ 7200 Insurance expence $ 920 Depreciation expence $ 500

Answer 1

To close the Income Summary account, you need to transfer the net income or net loss to the owner's capital account. In this case, the net income of $18,280 will be posted to Bessie Cool, Capital.

Step-by-step explanation:

To close the Income Summary account, we need to transfer the net income or net loss to the owner's capital account. In this case, we have to find the difference between the revenue and expense accounts:

• Revenue: $30,500
• Expenses: $3,600 (Rent expense) + $7,200 (Salaries expense) + $920 (Insurance expense) + $500 (Depreciation expense) = $12,220

The net income is calculated by subtracting the total expenses from the total revenue:

Net Income = Revenue - Expenses

Net Income = $30,500 - $12,220 = $18,280

The net income of $18,280 will be posted as a credit to the Bessie Cool, Capital account.