Question

Allen Insurance Agency started the year with a beginning Retained Earnings balance of $ 29 comma 000. During the​ year, Allen Insurance Agency earned $ 40 comma 000 of Service Revenue and incurred $ 25 comma 000 of various expenses. Dividends of $ 9 comma 000 from the business were paid to stockholders. After the closing entries are recorded and​ posted, what will be the balance of Retained​ Earnings?

Answer 1

Answer: $35,000

Explanation:

Retained Earnings refers to the Net Income that the business keeps after it pays out a portion of it to Shareholders as dividends.

Closing Balance on Retained Earnings = Opening Balance + Net Income - Dividends

Net income = Revenue - Expenses

= 40,000 - 25,000

= $15,000

Closing Balance on Retained Earnings = 29,000 + 15,000 - 9,000

= $35,000