Question

The following accounts are taken from the December 31, Year 4 financial statements of a company.

Accounts Payable	$	2,075
Accounts Receivable		800
Selling & Administrative Expenses		2,500
Cash		2,200
Common Stock		2,000
Dividends		1,900
Income Tax Expense		400
Interest Expense		75
Other Expenses		500
Notes Payable		5,000
Other Assets		2,500
Other Liabilities		3,000
Other Operating Expenses		2,000
Other Revenue		300
Property and Equipment		11,000
Retained Earnings, December 31, Year 3		4,800
Salaries and Wages Expense		3,000
Supplies		300
Service Revenue		10,000

What is the amount of retained earnings on the Balance Sheet at the end of Year 4?

Answer 1

Working Notes:
	Income Statement
	Service Revenue	$               10,000
	Add: Other Revenue	$                     300
	Total Revenue (A)	$               10,300
	Less: Expenses
	Selling and andminsitrative Expenses	$                 2,500
	Salaries and Wages expenses	$                 3,000
	Other Operating Expenses	$                 2,000
	Other Expenses	$                     500
	Interest Expenses	$                       75
	Income tax Expenses	$                     400
	Total Expenses (B)	$                 8,475
	Net Income (A-B)	$                 1,825
Solution:
	Calculation of Ending Retained Earnings
	Beginnin Retained Earnings	$                 4,800
	Add: Income of the year	$                 1,825
	Less: Dividend	$                 1,900
	Ending retained Earnings	$                 4,725
	Answer = $ 4,725