Question

Morris Company had the following adjusted trial balance:

Account Titles Debit Credit

Cash $21,460

Accounts Receivable 19,060

Supplies 7,690

Equipment 36,600

Accumulated Depreciation $8,700

Accounts Payable 4,690

Unearned Rent Revenue 2,240

Capital Stock 23,580

Retained Earnings 22,500

Dividends 15,000

Commission Revenue 49,700

Rent Revenue 7,300

Depreciation Expense 5,200

Utilities Expense 8,600

Supplies Expense 5,100

Total $118,710 $118,710

The president of Morris Company has asked you to close the books (prepare and process the closing entries).
Required:

After the closing process has been completed, answer the following questions:

During the closing process, what amount was transferred from the income summary account to the Retained Earnings account in the third closing entry (i.e., after revenue and expense accounts have been closed to Income Summary)?

$

What is the balance in the Retained Earnings account?

What is the balance in the depreciation expense account?

Answer 1

$38,100 ; $45,600 and $0

Step-by-step explanation:

The computation is shown below:

For amount transferred from the income summary account to the Retained Earnings account in the third closing entry i.e net income or net loss

As we know that

Net income = Total revenues - total expenses

Commission revenue $49,700

Rent revenue $7,300

Less: expenses

Depreciation expense - $5,200

Utilities expense -$8,600

Supplies expense -$5,100

Net income $38,100

The balance in retained earning account is

= Opening retained earning balance + net income - dividend paid

= $22,500 + $38,100 - $15,000

= $45,600

And, the balance in depreciation expense account is zero as this depreciation expense account is closed while closing the expenses account i.e utilities expense, supplies expense and depreciation expenses