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Nelson Company experienced the following transactions during Year 1, its first year in operation.

Acquired $12,000 cash by issuing common stock
Provided $4,600 of services on account
Paid $3,200 cash for operating expenses
Collected $3,800 of cash from customers in partial settlement of its accounts receivable
Paid a $200 cash dividend to stockholders

-What is the balance of the retained earnings that will be reported on the balance sheet as of December 31,Year 1?
A)$1,200
B)$1,000
C)$1,400
D)$13,200

Question

[The following information applies to the questions displayed below.]
 
Nelson Company experienced the following transactions during Year 1, its first year in operation.

Acquired $12,000 cash by issuing common stock 
Provided $4,600 of services on account 
Paid $3,200 cash for operating expenses 
Collected $3,800 of cash from customers in partial settlement of its accounts receivable 
Paid a $200 cash dividend to stockholders

-What is the balance of the retained earnings that will be reported on the balance sheet as of December 31,Year 1?
A)$1,200
B)$1,000
C)$1,400
D)$13,200

Quizplus · Accepted Answer

Ending retained earnings = Beginning retained earnings of $0 + Net income of $1,400 - Dividends of $200 = $1,200
Alternatively:
Assets of $13,200 = Liabilities of $0 + Common stock of $12,000 + Retained earnings
Retained earnings = $1,200

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