Question

The​ asset, liabilities, and equities of Damon Design Studio have the following balances at December 31​, 2018. The retained earnings was 39,000 at the beginning of the year. At year​ end, common stock was $ 13,000 and dividends were $ 57,000.Notes Payable $14,000Rent expense 23,000Cash 3,200Office supplies 5,100Salaries expense 65,000Property tax expense 2,200Office furniture 48,400Utilities expense 7,200Account payable 3,600Service revenue 154,600Account receivable 9,300Miscellaneous expense 3,800(a) Preparing the statement of retained earning(b) Prepare the statement of retained earning for Damon Design Studio for the year ending December 31, 2018.

Answer 1

The statement of retained earnings for Damon Design Studio for the year ending December 31, 2018, starts with an opening balance of $39,000, adds a net income of $53,400 and subtracts dividends of $57,000, resulting in an ending balance of $35,400.

Step-by-step explanation:

Preparing the Statement of Retained Earnings for Damon Design Studio

To prepare the statement of retained earnings for Damon Design Studio for the year ending December 31, 2018, we must consider the beginning balance of retained earnings, add the net income (or loss), and subtract any dividends paid during the year.

The beginning retained earnings is given as $39,000. We will calculate net income by subtracting total expenses from the total service revenue. Here's the detailed calculation:

• Service Revenue: $154,600
• Total Expenses (Rent expense + Salaries expense + Property tax expense + Utilities expense + Miscellaneous expense): $23,000 + $65,000 + $2,200 + $7,200 + $3,800 = $101,200
• Net Income: Service Revenue - Total Expenses = $154,600 - $101,200 = $53,400

Retained Earnings at the beginning of the year: $39,000

Plus Net Income: $53,400

Minus Dividends: $57,000

Retained Earnings at the end of the year: $39,000 + $53,400 - $57,000 = $35,400

Statement of Retained Earnings Summary

Damon Design Studio

Retained Earnings, January 1, 2018: $39,000

Add: Net Income for 2018: $53,400

Less: Dividends Paid in 2018: $57,000

Retained Earnings, December 31, 2018: $35,400

Answer 2

Step-by-step explanation:

For computing the retained earning ending balance, first, we have to compute the net income. So, the calculation is shown below:

= Service revenue - salaries expense - property tax expense - utilities expense - miscellaneous expense - rent expense

= $154,600 - $65,000 - $2,200 - $7,200 - $3,800 - $23,000

= $53,400

So, the net income would be $53,400

Now, we have to find the ending retained earning balance which equals to

= Beginning retained earning balance + net income - dividend paid

= $39,000 + $53,400 - $57,000

= $35,400

The preparation of the statement of retained earning is presented in the spreadsheet. Kindly find the attachment below: