Before closing journal entries, Entity T had the following balances at December 31, 20x1:

Sales revenue

$65,000

Cost of goods sold

40,000

Salaries expense

5,000

Rent expense

3,000

Other expenses

2,000

Retained earnings before closing

21,000

(1) Prepare journal entries to close revenue and expense accounts.

        Journal entry to close revenue account

Sales revenue

65,000

   Income summary

65,000

        Journal entry to close expense accounts

Income summary

50,000

   Cost of sales

40,000

   Salaries expense

5,000

   Rent expense

3,000

   Other expenses

2,000

        Income summary account before the balance transfer to retained earnings

Income

Summary

40,000

65,000

5,000

3,000

2,000

15,000

        

        [Note]

        Net income = Revenue - Expenses = $65,000 - $50,000 = $15,000