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26. if temporary accounts with debit balances equal to $200,000 and temporary accounts with credit balances...

26. if temporary accounts with debit balances equal to $200,000 and temporary accounts with credit balances equal to $300,000 are closed at the end of the accounting period. Which of the following would occur as a result of the closing entry?

a. Total Owner's Equity would have a net increase of $100,000

b. Long-Term Liabilities would have a net increase of $100,000

c. Total Assets would have a net increase of $100,000

d. Total Owner's Equity would have a net decrease of $100,000

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Answer #2

Answer is a) Total Owner’s equity would have a net increase of $100,000

Temporary accounts are closed end of the year by transferring balance to retained earnings which is part of owners’ equity. There is net credit balance of $100,000 in the temporary account. So it will be debited and credited will be to Owners’ equity. Hence total owner’s equity would have a net increase of $100,000. There is no impact on Long-term liabilities and assets because of closing entries. Answer is a)

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