Warren Enterprises began operations during Year 1.The company had the following events during Year 1:
1)The business issued $40,000 of common stock to its stockholders.
2)The business purchased land for $24,000 cash.
3)Services were provided to customers for $32,000 cash.
4)Services were provided to customers for $10,000 on account.
5)The company borrowed $32,000 from the bank.
6)Operating expenses of $24,000 were incurred and paid in cash.
7)Salary expense of $1,600 was accrued.
"8)A dividend of $8,000 was paid to the stockholders of Warren Enterprises.
After closing,what is the balance of the Retained Earnings account as of December 31,Year 1?"

Question

Quizplus · Accepted Answer

The balance of the Retained Earnings account can be calculated as follows:
Revenues: $32,000 (cash) + $10,000 (accounts receivable) = $42,000
Expenses: $24,000 (cash) + $1,600 (accrued salary) = $25,600
Net Income: $42,000 - $25,600 = $16,400
Dividends: $8,000
Retained Earnings: $16,400 - $8,000 = $8,400  Net income = Revenues of $42,000 – Operating expenses of $25,600 = $16,400
Ending retained earnings = Beginning retained earnings of $0 + Net income of $16,400 – Dividends of $8,000 = $8,400

Warren Enterprises Began Operations During Year 1