Question

Sammy’s Pizza opened on January 1, 2018. Sammy’s reported the following for cash revenues and cash expenses for the years 2018 to 2020: Cash Revenues Cash Expenses 2018 $ 20,000 $ 11,000 2019 $ 30,000 $ 14,000 2020 $ 40,000 $ 22,000 Required What would Sammy’s Pizza report for net income and retained earnings for the years 2018, 2019, and 2020? Assume that Sammy’s Pizza paid a $5,000 dividend to stockholders in 2019. What would Sammy’s Pizza report for net income and retained earnings for 2019 and 2020?

Answer 1

Answer:

2018 9,000 net income RE 9,000

2019 16,000 income RE 20,000

2020 18,000 income RE 38,000

Explanation:

we will do revenues less expenses to get the net income under cash basis:

year ended December 31th, 2018

revenue $ 20,000 - expense $ 11,000 = $9,000 income

Thus, 9,000 RE

year ended December 31th, 2019

revenue for 30,000 - expense 14,000 = 16,000 income

beginning 9,000

income     16,000

dividends  (5,000)

endining   20,000

year ended December 31th, 2020

$ 40,000 - $ 22,000 = $ 18,000

20,000 beginning + 18,000 income = 38,000