Question

Maria Queen was reviewing her business activities at the end of the year (2022) and decided to prepare a Retained Earnings Statement. At the beginning of the year her assets were $700,000 and her liabilities were $210,000. At the end of the year the assets had grown to $930,000 but liabilities had also increased to $340,000. Common Stock was $200,000 in both years. The netincome for the year was $220,000. The company paid dividends of $120,000 during the year.
Required:
Prepare a Retained Earnings statement in good form.

Answer 1

Answer:

Retained earnings at the beginning of the year;

Equity = Common stock + Retained earnings

Retained earnings =  Equity - Common stock

Equity = Assets - Liabilities

= 700,000 - 210,000

=$490,000

Retained earnings = 490,000 - 200,000

=$290,000

........................................................Maria Queen..................................................

.....................................Statement of Retained Earnings..................................

.........................................For the year ended 2022..........................................

Opening Balance...............................................................................$290,000

Add:

Net Profit .............................................................................................$220,000

Less:

Dividends.............................................................................................($120,000)

Retained Earnings, 31 Dec 2022............................................$390,000