Question

Martinville, Inc. earned revenues of $18,000 and incurred expenses of $4,000. The company declared and paid cash dividends of $3,500. What is the balance in the Income Summary account prior to closing net income or loss to the Retained Earnings account? Select one: A. debit balance of $14,000 B. credit balance of $18,000 C. credit balance of $14,000 D. debit balance of $10,500

Answer 1

C. credit balance of $14,000

Step-by-step explanation:

Net income = Earned revenues - Incurred expenses = $18,000 - $4,000 = $14,000

This net profit of $14,000 will be credited to the the Income Summary account before closing to the Retained Earnings account.

Therefore, the correct answer is C. credit balance of $14,000.