Question

A merchandiser uses a perpetual inventory system. The beginning Retained Earnings balance of the merchandiser was​ $95,000. During the​ year, Sales Revenue amounted to​ $75,000, Cost of Goods Sold was​ $30,000, and all other expenses totaled​ $12,000. The company declared and paid​ $19,000 as dividends. The last step in the closing process would include​ ________.

Answer 1

Answer:

income summary      14,000 debit

         Retained Earnings                  14,000 credit

Explanation:

The last step in the closing prosess it to transfer the income summary account balance into retained earnings.

Income Sumary will be used to close the temporary accounts which are, dividends, revenues and expenses:

                                      Income Sumary

                                   Debit             Credit

to close revenues                           75,000

to close expenses        42,000

to close dividends         19,000

totals:                              61,000      75,000

              Balance:                           14,000              

this is the amount to transfer into retained earnings.