Answer along with its Explanation:
The profit for the year is calculated as under:
Profit for the year = Revenue - Salaries and Wages - Maintenance and Repairs Expense - Income Tax Expense
Profit for the year = $17,470 - $8,870 - $3,370 - $1,470 = $3,760
Now the entry would be to close the expense and income accounts for the year and carry forward the difference (Profit for the year) to retained earnings.
The entry would be as under:
Dr Service Revenue $17,470
Cr Salaries and Wages Expense $8,870
Cr Maintenance and Repairs Expense $3,370
Cr Income Tax Expense $1,470
Cr Retained Earnings (Balancing figure) $3,760
The recording of the dividends (A decrease in Capital) would be decrease in the retained earnings which is given as under:
Dr Dividends $1,760
Cr Cash Balance $1,760
The waiving off this amount will be by debiting the retained earnings and crediting dividends paid.
Dr Retained Earnings $1,760
Cr Dividends $1,760
