Question

Please help. I'm not sure what to debit and what to credit?

Question 9 0.9 pts Presented below are selected account balances for Pitchfork, Inc. as of December 31, X1. Using this information, prepare the necessary Closing Entry that is recorded to permanently move Net Income into it's permanent equity account. Debit [Select] for [Select] Credit (Select] , for [Select] Inventory $ 60,000 Cost of Goods Sold $225,700 Common Stock 75,000 Selling Expenses 16,000 Retained Earnings 45,000 Administrative Expenses 38,000 Dividends 18,000 Income Tax Expense 30,000 Sales Returns 12,000 Sales Revenues 410,000 Sales Discounts 15,000 Income Summary

Answer 1

Answer:

The required closing entry to move net income into its permanent equity account is as follows:

Debit Income Summary , for $73,300 Credit Retained Earnings arnings 1. for I $73.300

Working:

Net Sales Revenue = Sales Revenue - Sales Return - Sales discount = 410000 - 12000 - 15000 = $383,000

Total expenses = Cost of Goods sold + Selling Expenses + Administrative expense + Income tax expense

=225700 + 16000 + 38000 + 30000

= $309,700

Net Income = Net sales revenue - Total expenses = 383000 - 309700 = $73,300

The T account of Income Summary account on posting the closing entry to close revenue to Income Summary and the closing entry to close expenses to Income Summary will be as follows:

Income Summary Account Dec 31, X1 $309,700 $383,000 Dec 31, X1 $73,300 Balance

As such after posting the two closing entries as above, the Income summary account will have a credit balance of $73,300, which is the net income.

Next closing entry to close Income Summary account and transfer net income to retained earnings will be:

Debit Income Summary $73,300

Credit Retained Earnings $73,300