Question: The income statement for Basket Weavers Inc. for the year ended June 30, 2012, is provided. Basket Weavers Inc. Income Statement For the Year Ended

The income statement for Basket Weavers Inc. for the year ended June 30, 2012, is provided.
Basket Weavers Inc.
Income Statement
For the Year Ended June 30, 2012
Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 786,000
Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (402,000)
Selling and general expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (53,800)
Income before income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 330,200
Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (115,570)
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 214,630
1. Prepare a journal entry to close the accounts to Retained Earnings.
2. What problem may arise in closing the accounts if the information from the income statement is used?

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