Question

Gracie Co. has the following information:

Net Sales: $22,000
COGS: $12,000
Operating Expenses: $3,000
Interest Revenue: $800
Unearned Revenue: $1,100
Accounts Payable: $500
Accounts Receivable: $4,000
Beginning Retained Earnings: $45,000
Dividends: $6,000
Calculate the ending balance in Retained Earnings for Gracie Co.

Answer 1

To calculate the ending balance in Retained Earnings for Gracie Co., you need to consider the changes in Net Income. The formula is Ending Retained Earnings = Beginning Retained Earnings + Net Income – Dividends.

Step-by-step explanation:

To calculate the ending balance in Retained Earnings for Gracie Co., we need to consider the changes in Net Income. The formula to calculate the ending balance in Retained Earnings is: Ending Retained Earnings = Beginning Retained Earnings + Net Income – Dividends

From the given information, we can calculate the Net Income:

1. Net Sales – COGS – Operating Expenses = $22,000 – $12,000 – $3,000 = $7,000
2. Net Income = $7,000 + Interest Revenue – Unearned Revenue = $7,000 + $800 – $1,100 = $6,700

Now, we can calculate the ending balance in Retained Earnings:

1. Ending Retained Earnings = $45,000 + $6,700 – $6,000 = $45,700