Question

Woodward Enterprises had the following events during 2013: The business issued $34,000 of common stock to its stockholders. The business purchased land for $26,000 cash. Services were provided to customers for $30,000 cash. Services were provided to customers for $19,000 on account. The company borrowed $30,000 from the bank. Operating expenses of $26,000 were incurred and paid in cash. Salary expense of $2,200 was accrued. A dividend of $18,000 was paid to the owners of Woodward Enterprises. Assuming the company began operations during 2013, the amount of retained earnings as of December 31, 2013 would be:

Answer 1

Answer:

$2,800

Explanation:

The computation of retained earnings is shown below:-

Retained earning = Service provided to customer for cash +  Service provided to customer on account - Operating expenses incurred and paid - Salary expenses accrued - Dividend paid

= $30,000 + $19,000 - $26,000 - $2,200 - $18,000

= $49,000 - $26,000 - $2,200 - $18,000

= $2,800

Therefore for computing the retained earning we simply applied the above formula.