Question

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

Cash$500, Land$800, Notes Payable$200, Common Stock$400, Retained Earnings?
Based on this information, the balance in the Retained Earnings account must be:_____________.

Answer 1

The Retained Earnings balance for Coastal Company is calculated using the accounting equation. With assets totaling $1,300 and liabilities of $200, the Stockholders' Equity equals $1,100. Deducting the Common Stock value of $400 leaves a Retained Earnings balance of $700.

Step-by-step explanation:

The accounting records of Coastal Company included the following account balances: Cash of $500, Land worth $800, Notes Payable of $200, and Common Stock of $400. To find the balance in the Retained Earnings account, we use the basic accounting equation: Assets = Liabilities + Stockholders' Equity. In this equation, Retained Earnings is a part of Stockholders' Equity alongside Common Stock.

Assets currently total $1,300 ($500 in Cash + $800 in Land). Liabilities are $200 (Notes Payable). Since we know that (Assets = Liabilities + Stockholders' Equity), we can rearrange the equation to solve for Retained Earnings: (Stockholders' Equity = Assets - Liabilities).

Thus, Stockholders' Equity is equal to $1,300 (Assets) minus $200 (Liabilities), which equals $1,100. Out of this amount, $400 is Common Stock, so the Retained Earnings must be $700 to balance the equation.

Therefore, the balance in the Retained Earnings account must be $700.