Question

Big-Mouth Frog Corporation had revenues of $330,000, expenses of $200,000, and dividends of $45,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a:

Answer 1

Answer: Credit of $130,000

Explanation:

If Income summary is closed to Retained Earnings, it means that the Income for the period is sent to the Retained earnings account.

The amount to be sent is;

= Revenue - expenses

= 330,000 - 200,000

= $130,000

As the Retained Earnings account will be increasing as a result of this, it will be a credit.