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Cornerstones of Financial Accounti...

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Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Cornerstone Exercise 1-20 Retained Earnings Statement

Parker Company has a balance of $3S,000 in retained earnings on January 1. During the year, parker reported revenues of $82,000 and expenses of $55,000. Parker also paid a dividend of $8,000.

Required:

What is the amount of retained earnings on December 31?

To determine

Concept Introduction:

Financial statements: Financial statements are prepared to summaries the account at the end of the period. The statements prepared are Income statement, Balance sheet, Statement of owner’s equity and Cash flows statements.

Statement of Retained earnings:

Items reported on a retained earnings statement are explained as follows:

  • Beginning Balance of Retained earnings is the ending balance of the retained earnings of the previous year.
  • Net Income or Net loss is the amount of net income earned or net loss incurred for the year.
  • Dividends Paid are taken for the year.
  • Ending Balance of Retained earnings is calculated as follows:

Ending Balance of Retained earnings = Beginning Balance of Retained earnings + Net Income − Net income − Dividends Paid

To Calculate:

Amount of retained earnings as on December 31.

Explanation

Amount of retained earnings as on December 31 is calculated as follows:

Beginning balance in the retained earnings $35,000

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