1. Which of the following accounts will be closed by debiting the Income Summary
ID: 2490165 • Letter: 1
Question
1. Which of the following accounts will be closed by debiting the Income Summary account?
2. A company purchased inventory for $3,000 from a vendor on account, FOB shipping point, with terms of 2/10, n/30. The company paid the shipper $100 cash for freight in. The company then returned damaged goods worth $200. The invoice was then paid eight days after the purchase. Assuming that there was no beginning inventory balance, the cost of inventory would be ________. (Assume a perpetual inventory system.)
3. A merchandiser uses a perpetual inventory system. The third step in the process of closing the accounts of a merchandiser is to ________.
make the expense accounts equal to zero via the Income Summary account
4. Jones Retail. had the following balances and transactions during 2017:
A. Owner, Capital B. Service Revenue C. Accounts Receivable D. Salaries ExpenseExplanation / Answer
1.
Answer is D. Salaries expense.
In the second step of the closing the accounts under perpetual inventory system, the debit side items of the income statement are made zero by debiting the Income summary account.
2.
Answer is C. $2,900.
Cost of inventory = Purchase price of inventory + Freight cost – Cost of inventory returned = $3,000 + $100 - $200 = $2,900
3.
Answer is "C. make the Income Summary account equal to zero via the Owner, Capital account"
In the first two steps, the debit and credits of the income statement are made zero via income summary account. In the third step, the balance in income summary account is tranferred to Owner's capital account.
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