Business, 02.03.2020 23:14 soreese02

After all revenue and expense accounts have been closed at the end of the fiscal year, Income Summary has a debit of $2,450,000 and a credit of $3,000,000. At the same date, Retained Earnings has a credit balance of $8,222,600, and Dividends has a balance of $125,000.

A. Journalize the entries required to complete the closing of the accounts on December 31.
B. Determine the amount of Retained Earnings at the end of the period.

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Answer from: lerasteidl

A. See explanation Section

B. Ending Retained Earnings = $8,647,600

Explanation:

Requirement A

As there is no information of revenues and expenses, we are giving only 2 closing journal entries.

Debit balance of Income Summary = $2,450,000 (It comes after closing the expense accounts)

Credit balance of Income Summary = $3,000,000 (It comes after closing the revenue accounts)

Closing Entries

December 31 Income Summary Debit $550,000

Retained Earnings Credit $550,000

(To close income summary to retained earnings) ($3,000,000 - $2,450,000) = $550,000

December 31 Retained Earnings Debit $125,000

Dividends Credit $125,000

(To close the dividends accounts to retained earnings)

Requirement B

Statement of Retained Earnings

For the year ended, December 31, 20Y2

Balances, January 1, 20Y1 $8,222,600

Add: Net Income $550,000 (Note: 1)

$8,772,600

Less: Dividends 125,000

Balances, December 31, 20Y2 $8,647,600

Note - 1: Income summary credit balance - Income summary debit balance = Net Income

$3,000,000 - $2,450,000 = $550,000

Answer from: Quest

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Answer from: Quest

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After all revenue and expense accounts have been closed at the end of the fiscal year, Income Summar...

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