(2) Prepare the journal entry to close revenue and expense accounts.

        Journal entry to transfer the balance of income summary account to retained earnings

Income summary

15,000

   Retained earnings

15,000

                

        [Note]

        Income summary account after the balance transfer to retained earnings

Income

Summary

40,000

65,000

5,000

3,000

2,000

15,000

0

Retained

Earnings

21,000

15,000

36,000

        

        [Note]

Retained earnings after closing = Retained earnings before closing + Net income = 21,000 + 15,000 = 36,000