Question

Sanchez Company engaged in the following transactions during Year 1:

• Started the business by issuing $11,700 of common stock for cash.
• The company paid cash to purchase $7,200 of inventory.
• The company sold inventory that cost $4,600 for $9,150 cash.
• Operating expenses incurred and paid during the year, $4,100.

Sanchez Company engaged in the following transactions during Year 2:

• The company paid cash to purchase $10,000 of inventory.
• The company sold inventory that cost $8,800 for $15,750 cash.
• Operating expenses incurred and paid during the year, $5,100.

Note: Sanchez uses the perpetual inventory system.

What is the amount of retained earnings as of December 31, Year 2?

Multiple Choice

• $1,850.

• $2,300.

• $7,100.

• $11,000.

Answer 1