Question

Exercise 4-5 Computing income summary and ending capital balance from closing entries LO C1, P2 Capri Company began the current period with a $20,000 credit balance in the K. Capri, Capital account. At the end of the period, the company’s adjusted account balances include the following temporary accounts with normal balances.
Service fees earned 70,000
Salaries expense 38,000
Depreciation expense 8,000
Interest revenue 7,000
K. Capri, Withdrawals 12,000
Utilities expense 4,000

After closing the revenue and expense accounts, what will be the balance of the Income Summary account?

Answer 1

Answer:

$27,000

Explanation:

The closing entries are as follows:

1. Service fees earned A/c Dr $70,000

  Interest revenue A/c Dr $7,000

                  To Income Summary $77,000

(Being revenue account closed)

2. Income summary A/c Dr $50,000

           To Salaries expense $38,000

           To Depreciation expense $8,000

           To Utilities expense $4,000

(Being expenses accounts are closed)

3. Income summary A/c Dr $27,000    ($77,000 - $50,000)

                    To Retained earning $27,000

(Being the difference is credited to retained earning)

Therefore, the balance left in the income summary account is $27,000