Question

The following accounts and balances are taken from Moore​ Company's adjusted trial​ balance:

Accounts Payable $8,000
Accounts Receivable 3,400
Accumulated Depreciation 1,400
Depreciation Expense 1,800
Dividends 2,800
Insurance Expense 2,300
Interest Revenue 1,240
Prepaid Insurance 2,220
Retained Earnings 10,600
Salary Expense 23,100
Service Revenue 35,800
Required :
What is the ending balance in Retained Earnings after the closing entries are​ completed?

Answer 1

Retained earnings = Beginning period retained earnings +Net income - Cash dividends - Stock dividends.

We need to find the net income and in order to do that we need to identify all the revenues and expenses.

Interest Revenue= 1,240

Service Revenue = 35,800

Total revenue = 35,800 +1,240 = 37,040

Now we need to find all the expenses

Depreciation expense= 1800

Insurance expense= 2,300

Salary expense = 23,100

Total expense= 1,800 + 2,300 + 23,100= 27,200

Net income = 37,040 -27,200= 9,840

Now we will put all these values in our formula to find the ending balance in retained earnings.

Beginning period retained earnings = 10,600

Net income = 9,840

Cash dividends = 2,800

Stock dividends = 0

Ending retained earning balance = 10,600+ 9,840 -2,800= 17,640

Step-by-step explanation: