1When a company records the year-end closing entries, the first step is to close the Revenues to Retained earnings.
2When a company records the year-end closing entries, the Income summary balance, before it is closed to Retained earnings, should be equal to the Net income or Net loss for the year.
3A net loss for the year increases the balance in Retained earnings.
No dividends were paid. At the end of the year 2015, Ajax would have a Retained earnings deficit of $1,000.
5Retained earnings as shown on the balance sheet can, under certain circumstances, show a negative balance.
6Which of the following describes the correct sequence of year-end closing entries?
A)Close Revenues to Income summary; close Expenses to Income summary; close Income summary to Retained earnings.
B)Close Expenses to Income summary; close Revenues to Income summary; close Income summary to Retained earnings.
C)Close Revenues to Income summary; close Income summary to Retained earnings; close Expenses to Retained earnings.
D)Close Revenues to Retained earnings; close Expenses to Retained earnings; close Income summary to Retained earnings.
7A company had $80,000 of Sales revenue and $75,000 of Expenses. Which of the following would be the first of three year-end closing entries?
A) Debit Retained earnings $5,000 and credit Income summary $5,000.
B) Debit Expenses $75,000 and credit Income summary $75,000.
C) Debit Income summary $5,000 and credit Retained earnings $5,000.
D) Debit Revenues $80,000 and credit Income summary $80,000.
8A company had $80,000 of Sales revenue and $75,000 of Expenses. Which of the following would be the second of three year-end closing entries?
A) Debit Income summary $75,000 and credit Expenses $75,000.
B) Debit Expenses $75,000 and credit Income summary $75,000.
C) Debit Income summary $5,000 and credit Retained earnings $5,000.
D) Debit Revenues $80,000 and credit Income summary $80,000.
9A company had $80,000 of Sales revenue and $75,000 of Expenses. Which of the following would be the third of three year-end closing entries? (Assume no dividends were paid.)
A) Debit Income summary $75,000 and credit Expenses $75,000.
B) Debit Expenses $75,000 and credit Income summary $75,000.
C) Debit Income summary $5,000 and credit Retained earnings $5,000.
D) Debit Revenues $80,000 and credit Income summary $80,000.
10Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. No dividends were paid. The first of the year-end closing entries should include which of the following line items?
A) Credit Retained earnings $120,000.
B) Debit Retained earnings $120,000.
C) Debit Income summary $120,000.
D) Credit Income summary $120,000.