The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: The amount of Carolina's retained earnings on December 31, Year 1 was:
A)$5,900
B)$7,200
C)$3,900
D)$4,900

Question

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1:  The amount of Carolina's retained earnings on December 31, Year 1 was:
A)$5,900 
B)$7,200 
C)$3,900 
D)$4,900

Quizplus · Accepted Answer

The retained earnings can be calculated as: 
Retained Earnings = Total Equity - (Common Stock + Paid-in Capital)
= $16,800 - ($5,000 + $6,900)
= $4,900

The Following Pre-Closing Accounts and Balances Were Drawn from the Records