Bay Camera
The company reported the following items on its financial statements for the year ended December 31:
$$\begin{array} { l r l r }
\text { Sales } & \text {\$780,000 } & \text { Cost of seles } & \$ 700,000 \
\text { Selling general and administrative expense } & 20,000 & \text { Other expense } & 15,000 \
\text { Dividends } & 5,000 & \text { Incone tax expense } & 12,500
\end{array}$$
-Refer to the figure Bay Camera.What amount will be reported as retained earnings on the balance sheet at December 31,assuming this is the first year of operations?

Question

Bay Camera
The company reported the following items on its financial statements for the year ended December 31:
 $$\begin{array} { l r l r } 
\text { Sales } & \text {\$780,000 } & \text { Cost of seles } & \$ 700,000 \
\text { Selling general and administrative expense } & 20,000 & \text { Other expense } & 15,000 \
\text { Dividends } & 5,000 & \text { Incone tax expense } & 12,500
\end{array}$$
-Refer to the figure Bay Camera.What amount will be reported as retained earnings on the balance sheet at December 31,assuming this is the first year of operations?

Quizplus · Accepted Answer

Retained earnings are calculated as net income minus dividends. Net income is sales minus cost of sales, selling general and administrative expenses, other expenses, and income tax expense. Thus, net income = $780,000 - $700,000 - $20,000 - $15,000 - $12,500 = $32,500. Retained earnings = $32,500 - $5,000 (dividends) = $27,500.

Bay Camera the Company Reported the Following Items on Its

Bay Camera
the Company Reported the Following Items on Its