Question

Acme Company Balance Sheet As of January 5, 2018 (amounts in thousands) Cash 14,300 Accounts Payable 1,900 Accounts Receivable 4,100 Debt 3,200 Inventory 5,800 Other Liabilities 4,000 Property Plant & Equipment 14,800 Total Liabilities 9,100 Other Assets 700 Paid-In Capital 7,700 Retained Earnings 22,900 Total Equity 30,600 Total Assets 39,700 Total Liabilities & Equity 39,700 Update the balance sheet above to reflect the transactions below, which occur on January 6, 2018 1. Sell product for $20,000 with historical cost of $16,000 2. Sell product for $30,000 with historical cost of $24,000 3. Sell product for $35,000 with historical cost of $28,000 What is the final amount in Retained Earnings? Please specify your answer in the same units as the balance sheet.

Answer 1

All amounts are in Thousands

Working

Transactions	Sales	Cost of Goods sold	Net income
1	$    20,000.00	$    16,000.00	$       4,000.00
2	$    30,000.00	$    24,000.00	$       6,000.00
3	$    35,000.00	$    28,000.00	$       7,000.00
Total	$    85,000.00	$    68,000.00	$     17,000.00

Calculation of Final balance of retained earnings

Balance in retained Earnings on January 5	$    22,900.00
Add: Income earned on 6th January	$    17,000.00
Balance in retained Earnings on January 6	$    39,900.00

Final balance of retained earnings = $39,900

Note

Just for clarification, generally there are other expenses such as Operating expenses, income taxes expense etc before income is transferred to retained earnings account. In the given question it is assumed that gross amount earned (sales-cost of goods sold) is transferred to retained earnings.