At the End of the Accounting Period,but Before Closing Entries

question 139

Multiple Choice

At the end of the accounting period,but before closing entries are made,Doug,the proprietor of Pepper's Cafe,has a debit balance of $12,250 in his drawing account and a credit balance of $36,150 in his capital account.Which of the following statements is correct?

• A)Doug's net income was $23,900.
• B)During the closing process,Doug will debit the drawing account for $12,250 and credit the capital account for $12,250.
• C)During the closing process,Doug will debit the capital account for $12,250 and credit the drawing account for $12,250.
• D)Doug's Retained Earnings account was $23,900.

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Definitions:

Marginal Propensity

The ratio of change in an economic variable (e.g., consumption, saving) to a change in another economic variable (e.g., income).

Disposable Income

Post-tax income that households can allocate towards savings and expenses.

Consumption Spending

The total amount of money that households spend on goods and services within a certain period.

Disposable Income

Income available to households for saving and expenditure post-income tax deductions.