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Rent Expense has a $500 debit balance at period end. Which entry closes it out to Retained Earnings?
ADebit Rent Expense $500; credit Retained Earnings $500
BDebit Retained Earnings $500; credit Rent Expense $500
CDebit Cash $500; credit Rent Expense $500
DDebit Retained Earnings $500; credit Cash $500
Answer & Solution
Correct answer: B. Debit Retained Earnings $500; credit Rent Expense $500
1. Rent Expense has a $500 debit balance.
2. To zero a debit balance, credit the account for that amount.
3. The offsetting debit goes to Retained Earnings, which decreases for expenses.
4. Option A reverses the entry; options C and D involve Cash, which is not part of closing.
5. Therefore debit Retained Earnings $500 and credit Rent Expense $500.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.4 "Closing Entries", p.25_
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