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13 August, 06:11

Warren Enterprises had the following events during Year 1: The business issued $32,000 of common stock to its stockholders. The business purchased land for $24,000 cash. Services were provided to customers for $28,000 cash. Services were provided to customers for $17,000 on account. The company borrowed $28,000 from the bank. Operating expenses of $24,000 were incurred and paid in cash. Salary expense of $2,000 was accrued. A dividend of $16,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, What is the amount of retained earnings as of December 31, Year 1

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  1. 13 August, 06:12
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    The amount of retained earnings as of December 31, Year 1 is $3,000

    Explanation:

    Service revenue = $28,000 + $17,000 = $45,000

    Less: Expenses

    Operating expenses = ($24,000)

    Salary expense = ($2,000)

    Net income = $19,900

    Less; Dividend = ($16,000)

    Retained earnings, December 31 = Service revenue - Operating expenses - Salary expense - Dividend

    = $45,000 - $24,000 - $2,000 - $16,000 = $3,000
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