What Effect Will the Following Closing Entry Have on the Retained

question 58

Multiple Choice

What effect will the following closing entry have on the retained earnings account?
$\begin{array}{|l|r|r|}\hline \text { Service Revenue } & 18,800 \\\hline \text { Interest Expense } & & 750 \\\hline \text { Operating Expenses } & & 15,500 \\\hline \text { Retained Earnings } & & 2,550 \\\hline\end{array}$

• A) Retained earnings will remain unchanged.
• B) Retained earnings will decrease by $2,550.
• C) Retained earnings will increase by $2,550.
• D) Retained earnings will be transferred to the income statement.

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Definitions:

Machine-Hours

A measure of production output or activity based on the number of hours a machine is operated within a given period.

Power Cost

Power cost refers to the expenditure associated with the consumption of electrical energy by a company or an individual.

Automotive Engines

The power units of vehicles, designed to convert fuel into mechanical energy to enable motion.

Labor Rate Variance

The difference between the actual labor rate paid and the standard labor rate expected, indicating over or underpayment.