Question

1) Tiptoe Shoes, had annual revenues of $204,000, expenses of $113,200, and paid dividends of $25,600 during the current year. The retained earnings account before closing had a balance of $316,000. The Net Income for the year is:

Multiple Choice

• $90,800

• $381,200

• $204,000

• $406,800

• $65,200

2) Tiptoe Shoes had annual revenues of $203,000, expenses of $112,700, and dividends of $25,200 during the current year. The retained earnings account before closing had a balance of $315,000. The entry to close the Income Summary account at the end of the year, after revenue and expense accounts have been closed, is:

Multiple Choice

• Debit Income Summary $65,100; credit Retained earnings $65,100

• Debit Retained earnings $90,300, credit Income Summary $90,300

• Debit Income Summary $90,300, credit Retained earnings $90,300

• Debit Retained earnings $65,100; credit Income Summary $65,100

• Debit Retained earnings $315,000; credit Income Summary $315,000

Answer 1

Question 1

Correct answer-------------$90,800

Working

Net income = Revenues - Expenses

Revenues	$        204,000.00
Less: expenses	$        113,200.00
Net income	$           90,800.00

Question 2

Correct answer-------------Debit Income Summary $90,300, credit Retained earnings $90,300

When revenue is closed the income summery will be have a balance of $203,000 and when expenses are closed the income summery account balance will become 90300.

The income summery will have a credit balance after closing revenues and expense so in order to close income summery the account will be debited with $90,300