Question

Roscoe Enterprises had the following events during 2019, its second year of operations:

• Services were provided to customers for $55,000 cash during 2019.

• Additional services were provided to customers for $10,000 on account during 2019.

• Operating expenses of $28,000 were incurred and paid in cash throughout 2019.

• Salary expense of $2,600 was incurred and accrued in 2019, but not paid until 2020.

• A dividend of $8,000 was paid to the stockholders of Roscoe Enterprises in February 2019. The dividend had been declared and properly accrued in 2018.

Assuming the company’s beginning retained earnings balance was $20,000 at January 1, 2019. The balance in the retained earnings account as of December 31, 2019 would be:

a. $36,400 b. $44,400 c. $46,400 d. $54,400

Answer 1

Working Notes:
	Income Statement
	Service Revenue	$               55,000
	Add: Other Revenue	$               10,000
	Total Revenue (A)	$               65,000
	Less: Expenses
	Operating Expenses	$               28,000
	Salary Expenses	$                 2,600
	Total Expenses (B)	$               30,600
	Net Income (A-B)	$               34,400
Solution:
	Calculation of Ending Retained Earnings
	Beginnin Retained Earnings	$               20,000
	Add: Income of the year	$               34,400
	Total	$               54,400
	Less: Dividend Declared and accrued in 2019	$                        -
	Ending retained Earnings	$               54,400
	Answer = Option D = $ 54,400