If Retained Earnings at December 31, 2010, is $100,000, Equipment is carried in Hercules Manufacturing, Inc. accounting records at:
A) $42,000.
B) $58,000.
C) $43,500.
D) $345,000.

Question

Quizplus · Accepted Answer

The Retained Earnings at December 31, 2010, represents the amount of net income earned by the company that has not been distributed as dividends. Equipment is a long-term asset that is recorded at its original cost less accumulated depreciation. Therefore, the Equipment amount is not directly related to the Retained Earnings balance. The only relevant information provided is that the Equipment is carried at a certain amount in the accounting records. The only answer option that could be a plausible value for the Equipment amount is option B, which represents a value between 42,000 and 345,000.

If Retained Earnings at December 31, 2010, Is $100,000, Equipment