Question

Assume that Sallisaw Sideboards, Inc. had a retained earnings balance of $10,000 on April 1, and that the company had the following transactions during April.

1.Issued common stock for cash, $5,000.
2.Provided services to customers on account, $2,000.
3.Provided services to customers in exchange for cash, $900.
4.Purchased equipment and paid cash, $4,300.
5.Paid April rent, $800.
6.Paid workers salaries for April, $700.

Answer 1

It is obvious that the requirement is the retained earnings at end of the year since the opening retained earnings and year's transactions were provided.

Closing retained earnings is $11,400

Step-by-step explanation:

The net income for the year is calculated thus:

Sales($2000+$900) $2,900

less expenses:

rent paid ($800)

salaries ($700)

Net income $1400

Hence closing retained earnings is opening retained earnings of $10,000 plus the net income realized in the year,which $11,400($10,000+$1,400).

The retained should be added to the share capital to arrive at shareholders' equity.