Question

Carmen Camry operates a consulting firm called Help Today, which began operations on August 1. On August 31, the company's records show the following accounts and amounts for the month of August Cash Accounts receivable office supplies Land office equipment Accounts payable Dividends $25,370 Consulting fees earned 27,010 9,570 5, 620 880 530 102,100 22,370 Rent expense 5,260 Salaries expense 44,010 Telephone expense 20,020 Miscellaneous expenses 10,540 Common stock 6,020 Exercise 2-17 Preparing a statement of retained earnings LO P3 Use the above information to prepare an August statement of retained earnings for Help Today,(

Answer 1

Answer:

                                Help Today

                 Statement  of Retained Earnings

           For the Month Ended on August 31, 202X

Retained earnings at the beginning of the period:          $0

Net Income:                                                                 $10,410

Dividends:                                                                  ($6,020)

Retained earnings at the end of the period              $4,390

Explanation:

First we must organize the numbers and prepare an income statement:

Consulting fees earned $27,010

Rent expense ($9,570)

Salaries expense ($5,620)

Telephone expense ($880)

Miscellaneous expenses ($530)

Net income: $10,410

then a balance sheet:

Balance Sheet

Assets:

Cash $25,370

Accounts receivable $22,370

Office supplies $5,260

Land $44,010

Office equipment $20,020

Total assets: $117,030

Liabilities and Equity:

Accounts payable $10,540

Common stock $102,100

Total liabilities and equity: $112,640

+ Retained earnings $4,390

Total: $117,030

Dividends 6,020

two ways to determine retained earnings:

• Retained earnings ⇒ assets - (liabilities + equity) = $117,030 - $112,640 = $4,390
• Another way to calculate retained earnings = net income - dividends = $10,410 - $6,020 = $4,390