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 $8,400 The starting balance of Inventory is $4,200 The starting balance of Retained Earnings is $23,500 1. Consume good or service and pay expense of $2 2. Sell product for $40 in cash with historical cost of $32 3. Sell, deliver, and receive payment of $25 for service What is the final amount in Retained Earnings?

Answer 1

Solution :

Total sales and service revenue = $40 + $25 = $65

Cost of goods sold = $32

consume goods or service and pay expense = $2

net income = Revenue - Expenses = $65 - ($32 + $2) = $31

Ending balance of retained earnings = Starting balance + Net Income = $23,500 + $31 = $23,531

Cash
Particulars	Debit	Particulars	Credit
Beginning balance	$8,400.00	Expenses	$2.00
Sales revenue	$40.00	Ending balance	$8,463.00
Service revenue	$25.00
Total	$8,465.00	Total	$8,465.00

Inventory
Particulars	Debit	Particulars	Credit
Beginning balance	$4,200.00	Cost of goods sold	$32.00
		Ending balance	$4,168.00
Total	$4,200.00	Total	$4,200.00

Retained Earnings
Particulars	Debit	Particulars	Credit
Ending balance	$23,531.00	Beginning balance	$23,500.00
		Net Income	$31.00
Total	$23,531.00	Total	$23,531.00