Question

At the end of Year 2, retained earnings for the Baker Company was $3,150. Revenue earned by the company in Year 2 was $3,400, expenses paid during the period were $1,800, and dividends paid during the period were $1,200. Based on this information alone, retained earnings at the beginning of Year 2 was:

$3,550.

$6,850.

$2,750.

$1,550.

A company's balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $74,000. What is the amount of liabilities?

		$104,000.
		$76,000.
		$32,000.
		$30,000.

Answer 1

Answer to Question 1.

Retained Earning, Year 2 End = Retained Earning, Year 2 Beginning + Net Income – Dividend
Net Income = Revenue – Expenses
Net Income = $3,400 - $1,800 = $1,600

$3,150 = Retained Earning, Year 2 Beginning + $1,600 - $1,200
$3,150 = Retained Earning, Year 2 Beginning + $400
Retained Earning, Year 2 Beginning = $2,750

Answer to Question 2.

Total Assets = Total Liabilities + Total Stockholders’ Equity
Total Assets = $24,000 + $30,000 + $50,000
Total Assets = $104,000

$104,000 = Total Liabilities + $74,000
Total Liabilities = $30,000