Allentown Corporation has on its statement of financial position the following amounts:
Total assets of $3,500,000
Total liabilities of $500,000
Contributed capital of $1,000 ,000.
What is the amount of retained earnings that should appear on Allentown's statement of financial position?

Question

Allentown Corporation has on its statement of financial position the following amounts: 
Total assets of $3,500,000 
Total liabilities of $500,000 
Contributed capital of $1,000 ,000. 
What is the amount of retained earnings that should appear on Allentown's statement of financial position?

Quizplus · Accepted Answer

The amount of retained earnings can be calculated using the accounting equation: Assets = Liabilities + Shareholders' Equity. Here, Shareholders' Equity includes Contributed Capital and Retained Earnings. So, Retained Earnings = Total Assets - Total Liabilities - Contributed Capital = $3,500,000 - $500,000 - $1,000,000 = $2,000,000.

Allentown Corporation Has on Its Statement of Financial Position the Following