Use This Information from the Income Statement Columns of the Work

question 2

Multiple Choice

Use this information from the Income Statement columns of the work sheet of Corner Laundry Service to answer the following question.
$\begin{array} { | l | r | r | } \hline & { \text { Income Statement } } \\\hline & \text { Debit } & \text { Credit } \\\hline \text { Laundry Revenue } & & 2,500 \\\hline \text { Wages Expense } & 750 & \\\hline \text { Rent Expense } & 500 & \\\hline \text { Supplies Expense } & 300 & \\\hline \text { Insurance Expense } & 200 & \\\hline \text { Income Taxes Expense } & 50 & \\\hline & 1,800 & 2,500 \\\text { Net Income } & 700 & \\\hline & 2,500 & 2,500 \\\hline\end{array}$
The entry to close Income Summary includes a

• A)\(\begin{array}{cc}
• \text { Income Summary } & 2,500 \\
• \text { Retained Earnings } & 2,500
• \end{array}\)
• B)Common Stock\(\quad\)\(\quad\)700
• Income Summary\(\quad\)\(\quad\)700
• C)\(\begin{array} { c c }
• \text { Income Summary } & 700 \\
• \text { Retained Earnings } & 700
• \end{array}\)
• D)Income Summary\(\quad\)\(\quad\)700
• Common Stock\(\quad\)\(\quad\)700

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Definitions:

MACRS

Modified Accelerated Cost Recovery System, a method of depreciation applied in the U.S. to determine the tax-deductible value of assets over time.

Marginal Tax Rate

The tax rate that applies to the last unit of currency of the taxpayer's income, influencing additional income's tax impact.

Net Cash Flows

Represents the amount of money that flows into and out of a business during a specific period, accounting for all income and expenses.

Straight-Line Basis

A method of calculating depreciation or amortization by evenly spreading the cost over the useful life of the asset.