Question

Consider the following account starting balances and transactions involving these accounts. Use T-accounts to record the starting balances and the offsetting entries for the transactions. The starting balance of Cash is $13,700 The starting balance of Inventory is $5,100 The starting balance of Retained Earnings is $24,500 1. Sell, deliver, and receive payment of $20 for service 2. Consume good or service and pay expense of $2 3. Sell product for $25 in cash with historical cost of $20 What is the final amount in Retained Earnings

Answer 1

Answer:

The final amount in Retained Earnings is:

= $24,523

Explanation:

a) Data and Analysis:

1. Cash $20 Service revenue $20

2. Expenses $2 Cash $2

3. Cash $25 Sales revenue $25

Cost of goods sold $20 Inventory $20

T-accounts:

Cash

Account Titles         Debit     Credit

Starting balance $13,700

Service revenue         20

Expenses                                    $2

Sales revenue            25

Balance                              $13,743

Inventory

Account Titles         Debit     Credit

Starting balance $5,100

Cost of goods sold                  $20

Balance                               $5,080

Service Revenue

Account Titles         Debit     Credit

Cash                                       $20

Sales Revenue

Account Titles         Debit     Credit

Cash                                       $25

Cost of goods sold

Account Titles         Debit     Credit

Inventory                   $20

Retained Earnings

Account Titles         Debit     Credit

Starting balance          $24,500

Service Revenue                   $20

Sales Revenue                        25

Total revenue                       $45

Cost of goods sold                20

Gross profit                         $25

Expenses                                 2

Net income                         $23

Retained earnings:

Starting balance        $24,500

Net income                          23

Ending balance         $24,523