Question

If the subtotal of the income statement debit column is $250,000, the subtotal of the income statement credit column is $300,000, and the total of the Statement of Retained Earnings debit column is $475,000, what is the beginning balance in Retained Earnings? (Assume no dividends were declared.)

Answer 1

$525,000 (Debit balance)

Step-by-step explanation:

Given that,

Total debit column income statement balance = $250,000

Total credit column income statement balance = $300,000

Ending retained earning debit balance = $475,000

Therefore,

Profit = Credit balance - Debit balance

= $300,000 - $250,000

= $50,000

Ending retained earnings = Beginning retained earnings + Profit

- $475,000 = Beginning retained earnings + $50,000

- $475,000 - $50,000 = Beginning retained earnings

- $525,000 = Beginning retained earnings

Therefore, the company has a debit balance of $525,000 in the beginning retained earnings.