Answer:
It is a credit to Retained Earnings. Credit of $133,000
Explanation:
Closing an entry means transferring all revenue (sales) account balance and expense account balance at the end of an accounting period to the income summary account.
This either leads to a net profit or loss for the period covered in the income summary account. The balance in the income summary then goes into the Retained Earnings.
Step 1: Transfer the revenue to the income summary...
Dr: Revenue - $334,000
Cr: Income summary - $334,000
Step 2: Transfer the expense to the income summary...
Dr: Income summary - $201,000
Cr: Expense- $201,000
This means Revenue (Dr) in step 1 minues Expense (Cr) in step two
$334,000 - $201,000 = $133,000.
The net profit of $133,000 is the transferred to Retained Earnings
Dr: Income summary - $133,000
Cr: Retained Earnings- $133,000
