Question

125 stion 35 On 1/1/21, the Rainbow Company had total equity of $2,680 of which $1,674 was Retained Earnings. Additional data for 2021 and 2022: 2021 2022 Net Income $450 $210 Common Stock Issued 330 100 Dividends Declared and Paid 170 0 Retained Earnings at 12/31/22 were: Select one O a $2.664 Ob $3,600 Oc 11,496 O d. $1.500 O $2,164 Accruing Interest Expense will Time let $2,164 Accruing Interest Expense will: Select one: O a. Increase total liabilities O b. Increase total assets Oc. Not affect stockholders' equity Od. Increase net income Oe. Not affect total liabilities

Answer 1

Based on the information provided, we can calculate the changes in retained earnings for 2021 and 2022 as follows:

Retained earnings at 1/1/21 = $1,674 Net income for 2021 = $450 Common stock issued in 2021 = $330 Dividends declared and paid in 2021 = $170

Retained earnings at 12/31/21 = $1,674 + $450 - $330 - $170 = $1,624

Net income for 2022 = $210 Common stock issued in 2022 = $100 Dividends declared and paid in 2022 = $0

Retained earnings at 12/31/22 = $1,624 + $210 - $100 - $0 = $1,734

Therefore, the answer is option A: $2,664 does not match the calculated value of $1,734.

Step-by-step explanation: