Question

At the end of Year 2, retained earnings for the Baker Company was $3,500. Revenue earned by the company in Year 2 was $1,500, expenses paid during the period were $800, and dividends paid during the period were $500. Based on this information alone, what was the amount of retained earnings at the beginning of Year 2?

Answer 1

Answer:

Net income in year 2   $

Revenue                      1,500

Expenses                      (800)

Dividends paid             (500)

Net income                   200

Retained earnings at the beginning of year 2

= Retained earnings at the end - Net income

= $3,500 - $200

= $3,300

Explanation:

In this case, there is need to calculate net income in year 2. Then, we will deduct the net income from the retained earnings at the end of year 2. This gives the amount of retained earnings at the beginning of year 2.