Question

Norton Corp. has revenues of $5,000 and expenses of $2,000. What is the total effect on retained earnings?

a)Decreases $2,000.
b)Increases $3,000.
c)Decreases $3,000.
d)Increases $7,000.

Answer 1

The total effect on Norton Corp.'s retained earnings is an increase of $3,000, calculated by subtracting the expenses of $2,000 from the revenues of $5,000. Option b

Step-by-step explanation:

The question pertains to the calculation of the effect of revenues and expenses on retained earnings for Norton Corp. To calculate the effect on retained earnings, we subtract total expenses from total revenues. In this case, the revenues are $5,000 and the expenses are $2,000.

Therefore, the retained earnings would increase by the difference between the two:

$5,000 (revenues) - $2,000 (expenses) = $3,000 (increase in retained earnings).

So, the correct answer is (b)Increases $3,000. Option b