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..

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

.

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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