Question

Jarrell Company began the year with $112,000 in its Common Stock account and a debit balance in Retained Earnings of $20,000. During the year, the company earned net income of $43,000 and declared and paid $8,000 of dividends. In addition, the company sold additional common stock amounting to $35,000. Based on this information, what is the ending Retained Earnings?

Answer 1

Answer:

Ending retained earnings = $15,000 Credit Balance

Explanation:

Opening balance of retained earnings = $20,000 Debit

Net Income of the year = $43,000

Dividend paid = $8,000

Net Profit to be added to retained earnings = $43,000 - $8,000 = $35,000

Closing balance of retained earnings = -$20,000 + $35,000 = $15,000 Credit Balance

Note: The amount of sale of additional stock is invalid and not to be considered, as this will not lay any impact on retained earnings.

Final Answer

Ending retained earnings = $15,000 Credit Balance