Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.) 1)Acquired $1,070 cash from the issue of common stock.2)Borrowed $540 from a bank.3)Earned $890 of revenues.4)Paid expenses of $370.5)Paid a $110 dividend.
During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.)
1)Issued an additional $445 of common stock.2)Repaid $340 of its debt to the bank.3)Earned revenues of $870.4)Incurred expenses of $480.5)Paid dividends of $220.
What is the after-closing amount of retained earnings that will be reported on Packard's balance sheet at the end of Year 2? (Assume that closing entries have been made).
A)$580
B)$1,220
C)$800
D)$180

Question

Quizplus · Accepted Answer

Retained earnings at the end of Year 1: $1,070 (beginning balance) + $890 (revenues) - $370 (expenses) - $110 (dividends) = $1,580.Retained earnings at the end of Year 2: $1,580 (beginning balance) + $445 (additional common stock) - $340 (repayment of debt) + $870 (revenues) - $480 (expenses) - $220 (dividends) = $1,220.

Packard Company Engaged in the Following Transactions During Year 1