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quester [9]
3 years ago
12

If sales are $540,000, expenses are $440,000 and dividends are $50,000, what is the balance of income Summary prior to closing?

a. It will have a credit balance of $50,000. b. It will have a debit balance of $50,000. c. It will have a debit balance of $100,000. d. It will have a credit balance of $100,000.
Business
1 answer:
alexandr402 [8]3 years ago
7 0

Answer:

d. It will have a credit balance of $100,000.

Explanation:

In the income statement, the total revenues and the total expenses are recorded.  

If the total revenues are more than the total expenditure then the company earns net income

And, If the total revenues are less than the total expenditure then the company have a net loss

This net income or net loss would reflect in the statement of the retained earning account.

So, the balance of income summary equals to

= Sales - expenses

= $540,000 - $440,000

= $100,000

The dividend should be deducted from the retained earning account. Hence, it will not be consider here

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Equipment in general governmental service that had been acquired several years ago by a special revenue fund at a cost of $40,00
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Answer:

D. A credit to Other Financing Sources for $5,000.

Explanation:

As the equipment is used for governmental service and sold, the journal entry to record the disposal is as follows:

Debit    Cash                                                 $15,000

Debit    Accumulated Depreciation             $30,000

Credit                 Equipment                                      $40,000

Credit                 Gain on sale of equipment            $5,000

Calculation: Book value of equipment = Cost price - Accumulated depreciation = $40,000 - $30,000 = $10,000

Therefore, Gain on sale of equipment = Disposal value - Book value = $15,000 - $10,000 = $5,000.

Therefore, option A is correct. Option B is also correct. Option C is also correct. Therefore, option D is not correct and it is the answer as it will not include in the journal.

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