Question

Papa John's International Inc. operates and franchises pizza delivery and carryout restaurants worldwide. The following is an alphabetical list of accounts and amounts reported in a recent year's set of financial statements. The accounts have a normal debit or credit balances and the dollars are rounded to the nearest million.

Accounts payable	$	32			Interest expense	$	11
Accounts receivable		65			Interest revenue		1
Accrued expenses payable		68			Inventories		31
Accumulated depreciation		406			Land		34
Additional paid-in capital		184			Long-term debt		470
Advertising expense		72			Long-term notes receivable		16
Buildings and leasehold improvements		228			Loss on impairment of assets		2
Cash		22			Other assets		48
Common stock		1			Other long-term liabilities		73
Cost of sales		1,059			Prepaid expenses and other current assets		45
Depreciation expense		44			Rent and utilities expense		62
Equipment		379			Restaurant and franchise sales revenue		1,784
General and administrative expenses		78			Retained earnings		?
Income tax expense		34			Salaries and benefits expense		240
Income tax receivable		4			Short-term notes receivable		4
Income taxes payable		11			Treasury stock		597
Intangible assets		87			Unearned revenue		6

Credit 406 PAPA JOHN'S INTERNATIONAL INC. Adjusted Trial Balance At the End of a Recent Year (in millions of dollars) Debit Cash $22 Short-term notes receivables 4 Accounts receivable 65 Inventories 31 Income tax receivable 4 Prepaid expenses and other current assets 45 Land 34 Buildings and leasehold improvements 228 Equipment 379 Accumulated depreciation Long-term notes receivable 16 Intangible assets 87 Other assets 48 Accounts payable Accrued expenses payable Unearned revenue Income taxes payable Other long-term liabilities Common stock Additional paid-in capital Retained earnings Restaurant and franchise sales revenue Cost of sales 1,059 Salaries and benefits expenses 240 Rent and utilities expense 62 Advertising expense 72 General and administrative expense 78 Deprec ion expense 44 Interest revenue Interest expense 11 Income tax expense 34 Long-term debt Totals $2,563 32 68 6 11 73 1 184 1,784 1 470 $3,036

Please help, it keeps saying I'm wrong on retained earnings when I enter 473 for it.

Answer 1

Solution :

The correct value of retained earnings is $126 and not $473.

Treasury stock (being the shares repurchased by the company from stakeholders ) should be shown on debit side of trial balance amounting $ 597

.Also Loss on impairment of assets should also be shown on debit side of trial balance amounting to $ 2.  

By adding these 2 itmes in trial balance , the balance of retained earnings comes as $ 126