Question

Determination of Retained Earnings and Net Income The following information appears in the records of Bock Corporation at the end of the year: Accounts Receivable $25,300 Retained Earnings ? Accounts Payable 12,100 Supplies $7,700 Cash 8,800 Equipment 154,000 Common Stock 121,000 a. Calculate the amount of retained earnings at the end of the year. b. Using your answer from part a, if the amount of the retained earnings at the beginning of the year was $33,000 and dividends were paid in the amount of $13,200 during 2012, what was the company's net income for the year? a. Retained Earnings Balance at year-end. $Answer 0 b. Net Income for the year. $Answer 0

Answer 1

Answer:

a. $62,700

b. $42,900

Explanation:

In this question, we have to use the accounting equation which is shown below:

Total assets = Total liabilities + owner equity

where,

Total assets = Cash + accounts receivable + supplies + equipment

                   = $8,800 + $25,300 + $7,700 + $154,000

                   = $195,800

Total liabilities = Accounts payable = $12,100

And, the owner equity = Common stock + retained earning

Now put the values to the above formula,

So, the values equal to

$195,800 = $12,100 + $121,000 + retained earnings

$195,800 = $133,100 + retained earnings

So, the retained earnings = $195,800 - $133,100 = $62,700

(B) The computation of the net income is shown below:

Net income = Ending retained earning balance - beginning retained earning balance + dividend paid

= $62,700 - $33,000 + $13,200

= $42,900