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 Interest revenue $ 7,000

Salaries expense 38,000 K. Capri, Withdrawals 12,000

Depreciation expense 8,000 Utilities expense 4,600

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

2. After all closing entries are journalized and posted, what will be the balance of the K. Capri, Capital account?

1. $26,400

2. $34,400

Explanation:

The closing entry for the following accounts are shown below:

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 $50,600

To Depreciation Expense $8,000

To Salaries Expense $38,000

To Utilities Expense $4,600

(Being expenses accounts are closed)

3. Income summary A/c Dr $26,400 ($77,000 - $50,600)

To K. Capri, Capital A/c $26,400

(Being the difference is credited to the capital account)

4. K. Capri capital $12,000

K. Capri withdrawals $12,000

(Being K. Capri withdrawals account is recorded)

Now the balance in the income summary is shown above i. e $26,400

And, the balance of the K. Capri, Capital account would be

= Credit balance + net income - withdrawals

= $20,000 + $26,400 - $12,000

= $34,400