Question

The accounting records of Coastal Company contained the following account balances.

Cash $ 500
Land $ 800
Notes Payable $ 200
Common Stock $ 400

The records also contained an account titled Retained Earnings. Based on this information the balance of the retained earnings account must be

Answer 1

The balance of the retained earnings account is $700.

Step-by-step explanation:

The balance of the retained earnings account can be calculated by using the accounting equation:

Assets = Liabilities + Equity

Given that the accounting records of Coastal Company contain the following accounts:

• Cash $500
• Land $800
• Notes Payable $200
• Common Stock $400

The retained earnings account represents the accumulated profits/losses of the company over time. To calculate the balance of the retained earnings account, we subtract the total liabilities and equity from the total assets:

Retained Earnings = Total Assets - (Liabilities + Equity)

Retained Earnings = $500 + $800 - ($200 + $400) = $700

Therefore, the balance of the retained earnings account is $700.