Question

Required information The following information applies to the questions displayed below) t 3 of 3 Ken Young and Kim Sherwood organized Reader Direct as a corporation, each contributed $53,000 cash to start the business and received 4,000 shares of stock. The store completed its first year of operations on December 31, 2017. On that date, the following financial items for the year were determined cash on hand and in the bank, $48,500, amounts due from customers from sales of books, $28,300. equipment, $52,000, amounts owed to publishers for books purchased, $8,800; one-year notes payable to a local bank for $4.950 No dividends were declared or paid to the stockholders during the year Book Print 4. Assuming that Reader Direct generates net income of $5,000 and pays dividends of $3,400 in 2018, what would be the ending Retained Earnings balance at December 31, 2018? References

Answer 1

Compute beginning retained earnings for 2018 as follows:

Beginning retained earnings = Total assets - accounts payable - Notes payable - Paid in capital

Beginning retained earnings = (48500 + 28300 + 52000) - 8800 - 4950 - (53000 * 2)

Beginning retained earnings = $9050

Compute ending retained earnings at December 31, 2018 as follows:

Ending retained earnings = Beginning retained earnings + net income - dividends

Ending retained earnings = 9050 + 5000 - 3400

Ending retained earnings = $10650