Question

Prat Corp. started the 2018 accounting period with $38,000 of assets (all cash), $16,000 of liabilities, and $13,000 of common stock. During the year, the Retained Earnings account increased by $15,050. The bookkeeper reported that Prat paid cash expenses of $30,000 and paid a $2,800 cash dividend to the stockholders, but she could not find a record of the amount of cash that Prat received for performing services. Prat also paid $11,000 cash to reduce the liability owed to the bank, and the business acquired $8,800 of additional cash from the issue of common stock.

Answer 1

Revenues = $47,850

Step-by-step explanation:

To find the revenue, we have to consider some of the things.

1. Increase in retained earnings: Net income increases retained earnings. To get net income, we need more revenues than expenses.

2. Expenses: As we have expenses, we can find the revenues with the help of retained earnings.

3. Dividends: After deducting the dividends, we can get whether retained earnings increase or decrease.

The following formula can be used -

Beginning retained earnings + Net income (current year) (revenues - expenses) - Dividends = Increase in retained earnings

Putting the value in the formula,

$0 + Revenues - $30,000 - $2,800 = $15,050

or, Revenues - $32,800 = $15,050

or, Revenues = $32,800 + $15,050 = $47,850