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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Business

Marcel Coffey

5 February, 18:34

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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Maggie Christensen · Answer 1

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