Kincaid Company's Retained Earnings balance on January 1 was $6,000. During the current year, Kincaid earned $3,400 in revenues and incurred $4,200 in expenses. Kincaid paid $2,500 in dividends, all in cash. After the closing entries are made, Kincaid's Retained Earnings balance on December 31 will be:

Question

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The net income for the year is $3,400 (revenues) - $4,200 (expenses) = -$800 (a net loss). The Retained Earnings balance is adjusted by subtracting the net loss and the dividends: $6,000 - $800 - $2,500 = $2,700.

Kincaid Company's Retained Earnings Balance on January 1 Was $6,000