A company started the current year with assets of $700,000, liabilities of $350,000 and common stock of $200,000.During the current year, assets increased by $400,000, liabilities decreased by $50,000 and common stock increased by $275,000.There was no payment of dividends to owners during the year.
-Use the information above to answer the following question.Based on this information,what was the amount of retained earnings at the beginning of the year?

Question

Quizplus · Accepted Answer

The accounting equation is Assets = Liabilities + Equity. At the beginning of the year, Equity = Common Stock + Retained Earnings. So, Retained Earnings = Assets - Liabilities - Common Stock = $700,000 - $350,000 - $200,000 = $150,000.

A Company Started the Current Year with Assets of $700,000