Question

On December 31 of year 1, Acme Company had assets of $145998, liabilities of $95447, and...

On December 31 of year 1, Acme Company had assets of $145998, liabilities of $95447, and capital stock of $30061. During year 2, Acme earned revenues of $45622 and incurred expenses of $33671. During year 2 the firm declared and paid Dividends amounting to $2633. Compute the company’s retained earnings (the total amount in the books) on December 31 of year 2..

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Answer #1


Retained earnings beginning of period = Assets - Liabilities - Capital

Retained earnings beginning of period = 145998 - 95447 – 30061

Retained earnings beginning of period = $20490

.

Now, calculate retained earnings during period 2:

Retained earnings during period 2 = Revenue - Incurred expensed – Dividend

Retained earnings during period 2 = 45622 - 33671 - 2633

Retained earnings during period 2 = $9318

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Now, calculate the company’s retained earnings for period 2:

Company’s retained earnings = Retained earnings beginning of period + Retained earnings during period 2

Company’s retained earnings = 20490 + 9318

Company’s retained earnings = $29808

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