Question

Warren Enterprises began operations during Year 1. The company had the following events during Year 1: The business issued $37,000 of common stock to its stockholders. The business purchased land for $29,000 cash. Services were provided to customers for $33,000 cash. Services were provided to customers for $22,000 on account. The company borrowed $33,000 from the bank. Operating expenses of $29,000 were incurred and paid in cash. Salary expense of $2,500 was accrued. A dividend of $21,000 was paid to the stockholders of Warren Enterprises. After closing, what is the balance of the Retained Earnings account as of December 31, Year 1

Answer 1

The balance of the retained earnings after closing is $2500

Step-by-step explanation:

Retained earnings=sales-operating expenses-accrued salaries-dividend paid to stockholders

sales consists of credit and cash sales i.e$33,000+$22,000=$55,000

operating expenses is $29,000

accrued salaries is $2,500

dividend of $21,000 were declared and paid to stockholders

retained earnings=$55,000-$29,000-$2,500-$21,000=$2500

The accrued salaries must be deducted from sales since it has been incurred even though not yet paid for.