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The income statement for the year 2015 of Fugazi Co. contains the following information:
Revenues : $70,000
Expenses:
Salaries and Wages Expense: $45,000
Rent Expense: 12,000
Advertising Expense: 10,000
Supplies Expense: 6,000
Utilities Expense: 2,500
Insurance Expense: 2,000
Total expenses: 77,500
Net income (loss): $(7.500)
After the revenue and expense accounts have been closed, the balance in Income Summary will be
- A) a credit balance of $7,500.
- B) $0.
- C) a credit balance of $70,000.
- D) a debit balance of $7,500.
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♦ Relevant knowledgeNet income is expressed as net profits also known as net income at close of an income report. It is treated the same way as the remainder of the amount following the adjustment of operating expenses. It is normally calculated by subtracting all expenses from all revenues.
Because after expenses and closing income, the income summary will show net income or loss. Here, company has lost so balance will be debit. Thus, the correct answer is D) A debit balance of $7.500
After expenses and closing income, the income summary will show net income or loss. Here company has lost. So balance will be debit.
Answer is D) A debit balance of $7.500
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