Question

The adjusted trial balance of Debit Company is shown below:

  Debit Company Adjusted Trial Balance December 31, 2012

Cash $6,500
Accounts receivable 8,000
Supplies 1,000
Prepaid Rent (3 months) 2,500
Equipment, net 42,000
Accounts payable $4,000
Salary payable 2,000
Unearned revenue (2 month advance) 2,000
Note payable â long term 14,000
Common stock 10,000
Retained earnings 14,700
Dividends 4000
Service revenue 75,000
Salary expense 40,000
Rent expense 10,000
Supplies expense 1,500
Depreciation expense 5,000
Utilities expense 1200
Total $121.700 $121.700

Required:
Prepare Debit Company's statement of retained earnings for the year ended December 31, 2012.

Answer 1

Answer:

Statement of retained earnings for the year ended December 31, 2012

Opening Retained Earnings (  $14,700 + $4,000 -  $17,300)     $ 1,400

Add Profit for the Year                                                                 $17,300

Less Dividends Paid                                                                    ($4,000)

Ending Retained Earnings Balance                                             $14,700

Explanation:

Statement of retained earnings = Opening Retained Earnings +  Profit for the Year - Dividends Paid

Therefore,

We need to find the Profit for the Year amount first

where,

Profit for the Year = Sales - Expense

and

Sales = $75,000

Expenses = $40,000 (Salary) + $10,000(Rent) + $1,500 (Supplies) + $5,000 (depreciation) + $1,200 (utilities) = $57,700

therefore,

Profit for the Year = $75,000  - $57,700

                              = $17,300