Question

On December 31, before the closing entries, the following information is available for Jones Company: Service Revenue $10,000 Total Expenses 6,000 Dividends 1,000 Retained Earnings 12,000 The balance of Retained Earnings after all closing entries would be:

Answer 1

Answer:

$15,000

Explanation:

Closing retained earnings is the accumulated value of an entity`s profit reserve from its earnings from  both current and past accounting periods.Closing retained earnings is calculated by deducting dividend paid from earnings after tax of the current year and adding the balance to opening retained earnings.

= Opening retained earnings + (Earnings after tax   -  Dividend paid)

Based on the information supplied, the closing retained earnings will be:

                                                                              $

Service Revenue                                                10,000

Total Expenses                                                  (6,000)

Operating profit                                                  4,000

Dividend                                                            (1,000)

Retained Earnings                                              3,000

Retained Earnings b/f                                         12,000

Closing Retained Earnings                                 15,000

Note: No information in regard of tax, so the operating profit is used as profit after tax.