Question

Assume that ABC had a retained earnings balance of $10,000 on April 1, and that the company had the following transactions during April. Issued common stock for cash, $5,000. Provided services to customers on account, $2,000. Provided services to customers in exchange for cash, $900. Purchased equipment and paid cash, $4,300. Paid April rent, $800. Paid employees' salaries for April, $700. What was ABC's retained earnings balance at the end of April

Answer 1

Answer:

ABC's retained earnings balance at the end of April is $11,400

Explanation:

The addition to retained earnings in the current month is revenue derived from providing services to customers minus the expenses such as rent and employee salaries

Net income for the month=$2,000+$900-$800-$700=$1400

Retained earnings at month end=opening retained earnings+net income

Retained earnings at month end=$10,000+$1,400=$11,400

Answer 2

The retained earnings balance at the end of April will be $11,400.

What are retained earnings?

Retained earnings are the part of the company's profits that the company sets aside for future requirements. The additions in retained earnings are the net profits for the relevant period.

The balance of retained earnings can be calculated as:

$\rm Retained\:earnings = Beginning\:balance + Net\:income$

The net income is the difference between income and payments:

$\rm Net\:Income = \ 2,000+ \ 900 - -\ 800 - \ 700\\\\\rm Net\:Income = \ 1,400$

Therefore the retained earnings will be:

$\rm Retained\:earnings = Beginning\:balance + Net\:income\\\\\rm Retained\:earnings = \ 10,000 + \ 1,400\\\\\rm Retained\:earnings = \ 11,400$

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