Question

Frosty Inc. has the following balances on December 31 prior to closing entries: Revenues $ 41,900 Retained Earnings, Jan. 1 8,100 Cash 7,300 Expenses 23,600 Accounts Payable 2,700 Dividends 2,800 Supplies 19,000 Based upon the balances above, what net adjustment would be made to Retained Earnings due to closing entries?

Answer 1

$23,600

Step-by-step explanation:

Ending figure / balance in the income statement = Revenue - Expenses - Dividends

= $41,900 - $23,600 - $2,800

= $15,500

It therefore means that the retained earnings will increase by $15,500

Retained earnings due to closing entries = $8,100 + $15,500

= $23,600

• Please note that other items such as cash, supplies and account payable are balance sheet items, hence must report to the balance sheet.