Question

The account balances and income statement of Winfrey Towing Service on June 30, 2018, follow:

Equipment $18,250 Service Revinue $10,800
Office Supplies 1,400 Account Receivable 8,400
Notes Payable 5,000 Accounts Payable 11,000
Rent Expense 550 Retined Earnings, June 1, 2018, 3,900
Cash 2,200 Salries Expense 1,900
Dividends 4,000 Common Stock 6,000
Requirements:

1. Prepare the statement of retained earnings for Winfrey Towing Service for the month ending June 30, 2018.

2. What does the statement of a retained earnings report?

Answer 1

1. WINFREY TOWING SERVICE

Statement of Comprehensive Income

$

Service revenue 10,800

Rent expense (550)

Salaries expense (1,900)

Dividends paid (4,000)

Net income 4,350

Statement of Retained Earnings

$

Retained earnings b/f 3,900

Add: Net income 4,350

Retained earnings c/f 8,250

2. Statement of retained earnings report changes in retained earnings of a company in a given accounting year.

Step-by-step explanation:

In this question, we need to obtain the net income of the company, which is service revenue minus expenses minus dividend. Then, the statement of retained earnings is prepared by taking cognisance of the retained earnings brought forward and add the net income for the year.