Question

Fill in the two blanks.

*The beg. retained earnings answer is not 11,000 or 34,000*

Homework: Chapter 1 part B homework Score: 0.96 of 2 pts 5 of 9 (9 complete) HW Score: 79.63%, 7.96 of 10 BE1-24 (similar to) Question Help The records of Potvin Company show the following at December 31, 2018 (Click the icon to view the data.) Read the requirements Requirement 1. Compute the missing amount for Potvin Company. You will need to determine Retained Earnings, December 31, 2018, and total stockholders equity, December 31,2018 Begin by determining total stockholders' equity. Rework the accounting equation and then solve for stockholders' equity (equity') at the beginning and end of the Darlad Assets 52000 Beginning Ending Liabilities 41.000 49.000 Equity 11.000 34,000 83.000 Identify the formula and then solve for the retained earnings balance at the end of the period. Ending equity Common Stock = Ending retained earnings 34.000 10,000 $ 24,000 Rearrange the formula to compute the change in retained earnings and then solve for the missing expense amount for Potvin Company (Abbreviations used: Beg. retained earnings Beginning retained earnings, End retained earnings - Ending retained eamings) Beg retained earnings Revenues End retained earnings Dividends Expenses 290,000 24,000 16,000 Choose from any list or enter any number in the input fields and then click Check Answer 1 part remaining Clear All Final Check

Answer 1

A statement of financial position reports assets, liabilities and shareholders’ equity. It is commonly known as a balance sheet. The balance sheet satisfies the accounting equation, that is: Assets = Liabilities + Shareholder's Equity

Shareholders’ equity: Shareholders’ equity is the difference between the net assets and net liabilities of the company. It is the amount raised through issues of common stock and held by way of retained earnings.

Retained Earnings: Retained earnings is that part of earnings of the company that is reinvested into the business. It is an accumulation of net income of the company.

Requirement 1: Total stockholders' equity = Common stock + Retained Earnings

Given: Ending stockholder's equity = $34,000

Ending retained earnings = $24,000

Putting the above two figures in the equation we get

$34,000 = Ending Common stock + $24,000

Ending common stock =$ 10,000

Now, as in the above given question there is no information relating to further issue or buy back of common stock throughout the period, it means that the common stock is unchanged.

So, ending equity is $34,000($10,000-common stock, $24,000 retained earnings)

Retained Earnings:

Retained Earnings, January 1,2018 $1,000

Add:Revenues $290,000

Less:Expenses ($251,000)

Less: Dividend ($16,000)

Retained Earnings, December 31,2018 $24,000

Ending Retained Earnings = Beginning retained earnings + Revenue -Expenses - Dividend

$24,000 = $1,000 + $290,000 - Expenses - $16,000

Expenses = $275,000 - $24,000 = $251,000

Requirement 2: Net Income = Revenue - Expenses

$290,000 - $251,000 = $39,000

Potvin earn a net income of $39,000.