Question

The following items appear on the adjusted trial balance of Barker Company:

Fees Earned 18,791
Rent Expense 4,600
Wages Expense 5,678
Dividends 440

Which of the following will be included in the second closing entry?

a. Credit to Retained Earnings for $440.
b. Debit to Retained Earnings for $18,791.
c. Credit to Dividends for $440.
d. Credit to Retained Earnings for $18,791.

Answer 1

Answer:

c. Credit to Dividends for $440.

Explanation:

The second closing entry is

Retained earnings $440

   To Dividend $440

(being the dividend account is closed)

Here the retained earnings is debited as it decreased the stockholder equity and the dividend is credited as it is closed

Also the first closing entry represent the closing of revenues and expenses

Therefore the option c is correct