Question

A merchandiser uses a perpetual inventory system. The beginning Retained Earnings balance of the merchandiser was​ $110,000. During the​ year, Sales Revenue amounted to​ $90,000, Cost of Goods Sold was​ $40,000, and all other expenses totaled​ $12,000. The company declared and paid​ $27,000 as dividends. The ending balance of Retained Earnings would be​ ________.

Answer 1

$121,000

Step-by-step explanation:

The computation of the ending retained earning balance is shown below:

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

where,

Beginning balance of retained earnings is $110,000

The dividend paid is $27,000

And, the net income is

= Sales revenue - cost of goods sold - all other expenses

= $90,000 - $40,000 - $12,000

= $38,000

So, the ending balance of retained earnings is

= $110,000 + $38,000 - $27,000

= $121,000

Answer 2

Ending Balance: 121,000

Step-by-step explanation:

`$$Beginning Retained Earnings$$$+/- Net Income/Loss$$$- Dividends$$$Equals Ending Retained Earning`

We need to calculate the net income:

sales - COGS - other expenses = net income

90,000 - 40,000 - 12,000 = 38,000 net income

Beginning 110,000

+net income 38,000

-dividends (27,000)

Ending Balance: 121,000