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 before closing balance in retained earnings is

Answer 1

The Year 2 before closing balance in retained earnings for Sanka Company is $4,300, calculated by adding the net income of $4,700 to the initial retained earnings of $600 and subtracting the dividends paid of $1,000.

Step-by-step explanation:

The student is asking for help in calculating the Year 2 before closing balance in retained earnings for Sanka Company, based on several financial events that occurred during the year. To calculate the before closing balance in retained earnings, we will consider the initial balance of retained earnings, add net income, and subtract any dividends paid.

Initial Retained Earnings: $600 (from Year 1)
+ Net Income: This is calculated by subtracting expenses from revenue. The revenue is $19,000 cash earned, and the expense is the cost of supplies used during the year. The cost of supplies used is the beginning supplies plus purchases minus the ending supplies ($5,200 + $14,000 - $4,900 = $14,300). Net income is then $19,000 - $14,300 = $4,700.
- Dividends Paid: $1,000
Finally, the sum would be: $600 + $4,700 - $1,000 = $4,300, which is the Year 2 before closing balance in retained earnings for Sanka Company.