Question

Packard Company engaged in the following transactions during 2015, its first year in operations: (Assume all transactions are cash transactions.)

1) Acquired $1,400 cash from the issue of common stock.
2) Borrowed $870 from a bank.
3) Earned $1,050 of revenues.
4) Paid expenses of $340.
5) Paid a $140 dividend.
During 2016, Packard engaged in the following transactions: (Assume all transactions are cash transactions.)
1) Issued an additional $775 of common stock.
2) Repaid $535 of its debt to the bank.
3) Earned revenues of $1,200.
4) Incurred expenses of $540.
5) Paid dividends of $190.

The total in Packard's retained earnings account before closing in 2015 is
-$0.
-$570.
-$710.
-$730.

Answer 1

The total in Packard's retained earnings account before closing in 2015 is -$730.

Step-by-step explanation:

The total in Packard's retained earnings account before closing in 2015 is -$730.

To find the total in the retained earnings account before closing, we need to calculate the net income for the year. Net income is calculated by subtracting expenses and dividends from revenues.

In 2015, Packard earned $1,050 of revenues and paid $340 in expenses and $140 in dividends. So, the net income for 2015 is $1,050 - $340 - $140 = $570.

The total in the retained earnings account before closing is the net income for the year, which is -$570 in this case. Since this is Packard's first year of operations, there is no previous balance in the retained earnings account, so the total before closing is equal to the net income for the year, which is -$570.