Question

Manchester Corporation's adjusted trial balance reported the following account balances at the end of the current year:

	Debit			Credit
Cash	$	15,000
Buildings and Equipment		85,000
Accumulated Depreciation				$	5,000
Accounts Payable					10,000
Common Stock					59,000
Retained Earnings					18,000
Sales Revenue					56,000
Depreciation Expense		25,000
Loss on Disposal of Assets		23,000
Totals	$	148,000		$	148,000

Which of the following will be included in the closing entry prepared at the end of the current year?

Multiple Choice

• Credit to Retained earnings for $8,000

• Debit to Retained earnings for $8,000

• Credit to Retained earnings for $31,000

• None of the answer choices are correct.

Answer 1

Answer - Credit to Retained earnings for 8,000 (Closing entry provided below)

Retained earnings account shows the accumulated profits/losses a business had earned up until that point, Credit balance of that account represents accumulated profits and debit balance represents accumulated losses

Manchester Corporation Income statement Particulars $ Sales revenue $ 56,000 Less- Depreciation expense 25,000 Loss on Disposal of Asset 23,000 48,000 Net Income 8,000

The entry to transfer income earned to the retained earnings (closing entry) account would be

Credit Debit 56,000 a S.no Account title Sales revenue Depreciation expense Loss on Disposal of Asset Income summary (To record transfer of Income and expense to Income summary account) 25,000 23,000 8,000 b 8,000 Income summary Retained earnings (To record transfer of income earned to Retained earnings) 8,000

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