Question

At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $210,000; Total Liabilities =$26,320: Total Paid-in capital of $61,430; and Retained earnings = $122,250. During the year, the company reported revenues of $53,650and expenses of $35,100. In addition, dividends for the year totaled $23,400. Assuming no other changes to Retained earnings, the balancein the Retained earnings account at the end of the year would be:At the end of the year, what is the balance in the Retained earnings account?

$61,430
$109,500
$133,100
$145,350

Answer 1

The Retained earnings at the end of the year would be $117,400 after adjusting for the net income of $18,550 and subtracting the dividends of $23,400. The options given do not include this correct answer, indicating a possible error in the provided choices.

Step-by-step explanation:

To calculate the Retained earnings at the end of the year, we need to adjust the beginning balance by adding net income (or subtracting net loss) and subtracting any dividends paid. The company started with a Retained earnings balance of $122,250. We then calculate the net income by subtracting expenses ($35,100) from revenues ($53,650), which gives us a net income of $18,550 for the year. Finally, subtract the dividends paid ($23,400) from this net income to find the amount by which Retained earnings has increased:

• Net Income: $53,650 - $35,100 = $18,550
• Change in Retained Earnings: $18,550 - $23,400 = -$4,850 (net decrease)
• Adjusted Retained Earnings: $122,250 + (-$4,850) = $117,400

The balance in the Retained earnings account at the end of the year would be $117,400, which is not one of the provided options. Therefore, it seems there might be an error in the options given or in the initial information provided.