Question

The Retained earnings account has a credit balance of $34,000 before closing entries are made. If total revenues for the period are $105,200, total expenses are $77,800, and dividends are $18,000, what is the ending balance in the Retained earnings account after all closing entries are made

Answer 1

Answer:

$43,400

Explanation:

Retained Earning is the accumulated balance of all the prior year's income / losses after paying all the dividend. This balance can be used for the dividend payment or reinvestment in the business.

As per given data

Retained Earning = $34,000

Adjustments

Net Income =Revenue - Total Expenses = $105,200 - $77,800 = $27,400

Dividend Payment = $18,000

Additions to Retained Earning = $27,400 - $18,000 = $9,400

Adjusted balance of Retained Earning = $34,000 + $9,400 = $43,400

Answer 2

Answer:

The ending balance of retained earnings account is $43,400.

Explanation:

Simply put, retained earnings are an amount of net income left after payment of dividends to shareholders. This amount accumulates over time period as the company retains profit for its operations. Usually, it is arrived at using the formula below:

Retained earnings = Opening balance + Net income (or loss) - Cash dividends - Stock dividends

At the instance of the question, retained earnings = $34,000 + $27,400 ($105,200 - $77,800) - $18,000 = $43,400.