Question

Sheffield Corp. had revenues of $344000, expenses of $184000, and dividends of $45000. 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 $160,000.

Step-by-step explanation:

Income summary being closed to the Retained earnings account means that the income for the year is sent to the Retained earnings account.

Inventory is paid from the Retained earnings so will not feature in the amount sent from the Income statement.

Income = Revenues - expenses

= 344,000 - 184,000

= $160,000

As the Retained earnings will increase, this is a CREDIT of $160,000.