Question

Use the following information to answer questions 16-17

Retained earnings at the beginning of the year was $50. During the year the company declared and paid dividends of $10, had revenues of $300, expenses of $240, capital expenditures of $30, paid-in-capital increased by $25 and debt increased by $40. There were no other transactions affecting equity during the year.

______16) What was net income for the year?

                  A. $20                        B. $30                        C. $60                        D. some other amount

______17) What is the ending balance of retained earnings?

                  A. $50                        B. $100                      C. $90                        D. some other amount

Answer 1

Question 16

Correct answer---(C) $ 60

Revenues	$    300.00
less: Expenses	$    240.00
Net income	$      60.00

Capital expenditure is not deducted from revenue to calculate net income.

Question 17

Correct answer----(B) $100

Calculation of Retained earnings ending balance
Beginning balance of retained earnings	$    50.00
Add: Earnings	$    60.00
Subtotal	$ 110.00
Less: Dividends paid	$    10.00
Ending retained earnings balance	$ 100.00