Question

Warren Enterprises had the following events during Year 1: The business issued $33,000 of common stock to its stockholders. The business purchased land for $25,000 cash. Services were provided to customers for $29,000 cash. Services were provided to customers for $18,000 on account. The company borrowed $29,000 from the bank. Operating expenses of $25,000 were incurred and paid in cash. Salary expense of $2,100 was accrued. A dividend of $17,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, the amount of retained earnings as of December 31, Year 1 would be:a. 32900
b. 2700
c. 47000
d. 2900

Answer 1

Answer:

d. 2900

Explanation:

We first need to calculate the net income:

cash revenue 29,000

credit revenue 18,000

total revenue                                47,000

cash operating expenses 25,000

accrued expenses              2, 100

total expenses                              (27,100)

Net income                                   19,900

now we can calcualte the retained earnings

 Beginning RE                 0

 + Net Income          19,900

 - Dividends            (17,000)  

 Ending RE               2,900