Question

Sanka Company's Year 1 balance sheet showed $1,700 cash, $5,200 supplies, $2,300 accounts payable, $4,000 common stock, and $600 retained earnings. The company experienced the following events during Year 2.

(1) Purchased $14,000 of supplies on account
(2) Earned $19,000 cash revenue
(3) Paid $14,200 cash to reduce accounts payable created in Event 1 above
(4) Paid a $1,000 cash dividend.
(5) Physical count revealed $4,900 of supplies on hand at the end of Year 2
Based on this information, the Year 2 after closing balance in retained earnings is

Answer 1

The Year 2 after closing balance in retained earnings for the Sanka Company is calculated by taking the beginning retained earnings of $600, adding the net income of $19,000, and subtracting the dividends paid of $1,000, resulting in a balance of $18,600.

Step-by-step explanation:

The calculation of Year 2 after closing balance in retained earnings for Sanka Company involves recording each given event's impact on the retained earnings account.

1. Earnings were $19,000 in cash revenue.
2. A dividend of $1,000 was paid in cash.

To find the closing balance in retained earnings, we need to adjust the beginning balance by these amounts:

Beginning Retained Earnings: $600 (from Year 1)
Add: Net Income (Total Revenue - Expenses; There are no expenses given, so assume all revenue is profit): $19,000
Less: Dividend Paid: -$1,000
Ending Retained Earnings: $600 + $19,000 - $1,000 = $18,600

The Year 2 after closing balance in retained earnings for Sanka Company would be $18,600.