Question

These questions are based on the following information compiled for our company at the end of the current year:

Cash	$2,000
Accounts receivable	$2,500
Equipment	$200
Vehicle	$4,000
Accounts payable	$1,350
Unearned revenue	$700
Common stock	$1,000
Retained earnings	$3,950 (Balance as of January 1 of the current year)
Dividends	$500
Service revenue	$4,500
Salaries expense	$1,500
Rent expense	$300
Advertising expense	$500

Calculate the dollar amount for net income on our current year’s income statement (December 31).

a) 1700 b) 2200 c) 2700 d) 4200

Calculate the dollar amount for retained earnings on our balance sheet at the end of the current year (December 31).

a) 5150 b) 6150 c) 5650 d) 7650

Calculate the dollar amount for total assets on our balance sheet at the end of the current year (December 31).

a) 8700 b) 9700 c) 10700 d) 13200

Answer 1

a)	Computation of Net Income
	Service Revenue			$ 4,500.00
Less:	Expenses
	Salaries Expense		$ 1,500.00
	Rent Expense		$    300.00
	Advertising Expense		$    500.00	$ 2,300.00
	Net Income			$ 2,200.00
	Answer:	B

b)	Computation of Ending Balance of Retained Earnings
	Particulars			Amount
	Beginning Balance			$ 3,950.00
Add:	Net Income			$ 2,200.00
Less:	Dividend			$    500.00
	Ending Balance			$ 5,650.00
	Answer:	C

c)	Computation of Total Assets
	Cash		$ 2,000.00
	Accounts Receivable		$ 2,500.00
	Equipment		$    200.00
	Vehicle		$ 4,000.00
			$ 8,700.00
	Answer:	A