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26 February, 16:06

Crane Company had revenues of $334000, expenses of $201000, and dividends of $47000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a

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  1. 26 February, 17:40
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    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
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Home » Business » Crane Company had revenues of $334000, expenses of $201000, and dividends of $47000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a
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