Question

Bava Consulting has the following account balances at December 31, the end of its fiscal year. Service Fees Earned $85,000 Rent Expense $22,000 Salaries Expense 50,000 Supplies Expense 4,000 Depreciation Expense 18,000 Retained Earnings 70,000 Set up T-accounts for each account and record the above amounts in each account. Then, post the closing entries to the T-accounts. After these entries are posted, what is the balance of the Retained Earnings account

Answer 1

Retained earnings Ending balance = $61,000

Step-by-step explanation:

Retained earnings - Beginning balance $70,000

Add: Net income (-$9,000)

Retained earnings - Ending balance $61,000

Note:

Net Income = Service Fees Earned - Rent Expense - Salaries Expense - Supplies Expense - Depreciation Expense

Net Income = $85,000 - $22,000 - $50,000 - $4,000 - $18,000

Net Income = -$9,000