Question

The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales of $83,490, costs of $68,407, depreciation of $8,200, dividends of $950, and interest paid of $478. The tax rate is 34 percent. What is the retained earnings balance at the end of the year?

Answer 1

Answer:

Explanation:

The formula for ending retained earnings is as follow:

Beginning Retained Earnings

+ Net Income

- Dividends

Equals to Ending Retained Earnings

Our first step will be to calculate the net income, as we are given with the revenues and expenses account

income = revenue - expenses

sales                               83,490

cost                 68,407

deprecation      8,200

interest expense  478

Total expenses             (77,085‬)

Income Before Taxes      6,405

Income Tax expense

34% of 6,405                    (2,178)

Net Income                       4,227

Now, we can return to our main formula and solve for ending RE

beginning            18,670

+ net income         4,227

- dividends              (950)

Ending                  21,947‬