Question

Consider the following account starting balances and transactions involving these accounts. Use T-accounts to record the starting balances and the offsetting entries for the transactions. The starting balance of Cash is $13,700 The starting balance of Inventory is $5,100 The starting balance of Retained Earnings is $24,500 1. Sell, deliver, and receive payment of $20 for service 2. Consume good or service and pay expense of $2 3. Sell product for $25 in cash with historical cost of $20 What is the final amount in Retained Earnings

Answer 1

The final amount in Retained Earnings is:

= $24,523

Step-by-step explanation:

a) Data and Analysis:

1. Cash $20 Service revenue $20

2. Expenses $2 Cash $2

3. Cash $25 Sales revenue $25

Cost of goods sold $20 Inventory $20

T-accounts:

Cash

Account Titles Debit Credit

Starting balance $13,700

Service revenue 20

Expenses $2

Sales revenue 25

Balance $13,743

Inventory

Account Titles Debit Credit

Starting balance $5,100

Cost of goods sold $20

Balance $5,080

Service Revenue

Account Titles Debit Credit

Cash $20

Sales Revenue

Account Titles Debit Credit

Cash $25

Cost of goods sold

Account Titles Debit Credit

Inventory $20

Retained Earnings

Account Titles Debit Credit

Starting balance $24,500

Service Revenue $20

Sales Revenue 25

Total revenue $45

Cost of goods sold 20

Gross profit $25

Expenses 2

Net income $23

Retained earnings:

Starting balance $24,500

Net income 23

Ending balance $24,523