Question

Lena Company has provided the following data (gnore income taxes); 2016 revenues were $77,000. 2016 expenses were $48,600. Dividends declared and paid during 2016 totaled $7,700. Total assets at December 31, 2016 were $185,000. Total liabilities at December 31, 2016 were $105,000. Common stock at December 31, 2016 was $27,000. Which of the following is correct? a. 2016 net income was $20,700 b. Retained earnings at December 31, 2016 were $20.700. c. Total stockholders' equity at December 31, 2016 was $244.000. d. Retained earnings at December 31, 2016 were $53,000.

Answer 1

Answer:

Option (b) is correct.

Explanation:

(a) Net Income:

= Revenues - Expenses

= $77,000 - $48,600

= $ 28,400

(b) Retained earnings :

= Net Income - Dividend

= $ 28,400 - $7,700

= $20,700

(c) Stockholders' Equity:

= Total assets - Total Liabilities

= 185,000 - $105,000

= $80,000

Therefore, the retained earnings at December 31, 2016 were $20,700.