menu
bartleby
search
close search
Hit Return to see all results

Ken Young and Kim Sherwood organized Reader Direct as a corporation; each contributed $55,000 cash to start the business and received 4,000 shares of stock. The store completed its first year of operations on December 31, 2017. On that date, the following financial items for the year were determined: cash on hand and in the bank, $50,500; amounts due from customers from sales of books, $28,500; equipment, $54,000; amounts owed to publishers for books purchased, $9,000; one-year notes payable to a local bank for $5,250. No dividends were declared or paid to the stockholders during the year.Assuming that Reader Direct generates net income of $6,000 and pays dividends of $3,600 in 2018, what would be the ending Retained Earnings balance at December 31, 2018?This is the problem I have been given, and I've gotten to this point. I am just very confused on the Ending RE and Beginning RE.So far I haveENDING RE = BEG RE + Net Income- Dividends________ = _______ + 6,000 - 3,600

Question

Ken Young and Kim Sherwood organized Reader Direct as a corporation; each contributed $55,000 cash to start the business and received 4,000 shares of stock. The store completed its first year of operations on December 31, 2017. On that date, the following financial items for the year were determined: cash on hand and in the bank, $50,500; amounts due from customers from sales of books, $28,500; equipment, $54,000; amounts owed to publishers for books purchased, $9,000; one-year notes payable to a local bank for $5,250. No dividends were declared or paid to the stockholders during the year.

Assuming that Reader Direct generates net income of $6,000 and pays dividends of $3,600 in 2018, what would be the ending Retained Earnings balance at December 31, 2018?

This is the problem I have been given, and I've gotten to this point. I am just very confused on the Ending RE and Beginning RE.

So far I have
ENDING RE = BEG RE + Net Income- Dividends
________ = _______ + 6,000 - 3,600

check_circleAnswer
Step 1

The first step in the computation is to find out the Beginning balance of Retained earnings on Dec31, 2017.

The same will be computed by adding up all the assets accounts and getting the total assets as on Dec31, 2017 and then deduct the total outside liabilities and paid in capital as on Dec31, 2017 from total assets to arrive at the amount of Balance of Retained earnings as on Dec31, 2017.

The same has been computed as $ 8750 as under:

fullscreen
Step 2

The Next step is prepare the statement of Retained earnings as on Dec31 2018, which can be prepared by adding the net income earned for the year 2018 in the begining balance of Retained earnings as on Dec31, 20...

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Our solutions are written by experts, many with advanced degrees, and available 24/7

See Solution
Tagged in

Business

Accounting

Related Accounting Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: On January 1, 2017, Windsor, Inc. had these stockholders’ equity balances. Common Stock, $1 par (...

A: The Equity section is divided into several sub-parts like paid in capital, additional paid in capita...

question_answer

Q: At December 31, 2018, Burr AG owes €500,000 on a note payable due February 2019. (a) If Burr intends...

A: Current liability: Current liability is an obligation that the companies need to pay from the remain...

question_answer

Q: Comprehensive Accounting Cycle Review 9-1 (Part Level Submission) Pina Colada Corp.’s unadjusted tr...

A: Explanation for the entry adjustmentDec 2- The Equipment cost including sales tax needs to be capita...

question_answer

Q: Vat tax - the popularity of this type of tax, the nature of this type of tax and the effect on gover...

A: Value Added Tax (VAT):  It is a consumption tax placed on manufactured goods, at whatever time value...

question_answer

Q: Concord Company produces Optimist sailboats. The costs of producing 107000 tiller extensions for use...

A: Compute the increase or decrease in the net income: 

question_answer

Q: Flexible Budgets; Total Operating Income Variance; Breakdown of the Total Operating Income Variance;...

A: 1. Total operating income variance for July.

question_answer

Q: Problem 14-5In each of the following independent cases, the company closes its books on December 31....

A: Amortization of bond: The process of allocation and reduction of the discount or premium on bonds to...

question_answer

Q: Which of the following do not show up on a post-closing trial balance?   Assets and liabilities ...

A: Post closing trial balance: The post closing trial balance is a summary of all ledger accounts, and ...

question_answer

Q: Problem 14-2Concord Co. is building a new hockey arena at a cost of $2,620,000. It received a downpa...

A: Calculate Issue price of the bonds. 

Sorry about that. What wasn’t helpful?