Question

At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $225,000; Total Liabilities = $100,000; Common Stock, $25,000, and Retained Earnings = $100,000. During the year, the company reported revenues of $46,000 and expenses of $30,000. In addition, dividends for the year totaled $20,000. Assuming no other changes to retained earnings, the balance in the retained earnings account at the end of the year would be:
a. $116,000.
b. $136,000.
c. $24,000.
d. $96,000.
e. $104,000.

Answer 1

Answer:

correct option is d. $96,000

Explanation:

given data

Total Assets = $225,000

Total Liabilities = $100,000

Common Stock, $25,000

Retained Earnings = $100,000

to find out

balance in the retained earnings account at the end of the year

solution

we apply here equation of Retained earnings Ending balance that is

Retained earnings Ending balance = Retained earnings Beginning balance + Net income - Dividends       .........................1

and we know that net income is here

Retained earnings Ending balance = Retained earnings Beginning balance + (Revenues - Expenses) - Dividends

so put here value

Retained earnings Ending balance = 100,000 + (46,000 - $30,000)-20,000

so

Retained earnings Ending balance will be  = 100,000 + 16,000 - $20,000

Retained earnings Ending balance is  = $96,000

so correct option is d. $96,000