Question

Warren Enterprises had the following events during Year 1: The business issued $32,000 of common stock to its stockholders. The business purchased land for $24,000 cash. Services were provided to customers for $28,000 cash. Services were provided to customers for $17,000 on account. The company borrowed $28,000 from the bank. Operating expenses of $24,000 were incurred and paid in cash. Salary expense of $2,000 was accrued. A dividend of $16,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, What is the amount of retained earnings as of December 31, Year 1

Answer 1

Answer:

The amount of retained earnings as of December 31, Year 1 is $3,000

Explanation:

Service revenue =  $28,000 + $17,000 = $45,000

Less: Expenses  

Operating expenses = ($24,000)

Salary expense = ($2,000)

Net income = $19,900

Less; Dividend = ($16,000)

Retained earnings, December 31 = Service revenue - Operating expenses - Salary expense - Dividend

= $45,000  - $24,000 - $2,000 - $16,000 = $3,000