Wald Corporation's adjusted trial balance shows the following temporary accounts: service revenue: $20,000; salaries expense $8,000; insurance expense: $2,000; utilities expense: $3,000; interest expense $200; and depreciation expense: $1,400. As part of the the closing process, Wald should credit retained earnings for:

a. $5,400

b. $20,000

c. $14,600

Correct answer is A $5,400

Explanation:

At the end of the calendar/fiscal year, all nominal accounts should be closed to retained earnings. And we need to make 2 entries.

Closing entries:

First, close all nominal accounts to income and expense summary account

Debit Service revenue $20,000

Credit Salaries expense $8,000

Credit Insurance expense $2,000

Credit Utilities expense $3,000

Credit Interest expense $200

Credit Depreciation expense $1,400

Credit income & expense summary $5,400

Second, close income and expense summary account to Retained earnings

To close income & expense summary:

Debit income and expense summary $5,400

Credit Retained earnings $5,400