Answer:
D. Retained earnings are $ 280,OOO and expenses incurred totaled $ 520,000.
Explanation:
We need to consider the accounting equation to determine the amount of retained earnings at end of year.
The accounting equation being:
Assets = Liabilities + Stockholders' Equity
$ 600,000 = $ 320,000 + Stockholders' equity
so the Stockholders Equity is $ 280,000
For determining expenses, we use the following equation:
Revenue - Expenses = Net Income
Being the first year of operations, the net income equals to the retained earnings
$ 800,000 - Expenses = $ 280,000
So expenses are $ 800,000 - $ 280,000 = $ 520,000
