Question

At the beginning of the year, ABC Company showed $30,000 of assets, $10,000 of liabilities, $19,500 of retained earnings, during the year, the company recognized $3,000 of revenue, $2,000 of expenses and paid $500 of dividends. What's the balance of retained earnings on the balance sheet at year end?

Answer 1

The year-end balance of retained earnings for ABC Company, after accounting for revenue, expenses, and dividends, is $20,000.

Step-by-step explanation:

The question requires calculating the year-end balance of retained earnings for ABC Company. Retained earnings at the beginning of the year were $19,500. Throughout the year, the company generated $3,000 in revenue and had $2,000 in expenses. It also paid out $500 in dividends. The change in retained earnings is equal to the net income (revenue minus expenses), less dividends paid. Therefore, the calculation is as follows: $19,500 beginning balance + ($3,000 - $2,000) - $500 in dividends = $20,000. The balance of retained earnings at year-end would be $20,000.