At the beginning of April, Owl Corporation has a balance of $13,000 in the Retained Earnings account. During the month of April, Owl had the following external transactions. 1. Issue common stock for cash, $11,000. 2. Provide services to customers on account, $8,500. 3. Provide services to customers in exchange for cash, $3,200. 4. Purchase equipment and pay cash, $7,600. 5. Pay rent for April, $1,100. 6. Pay employee salaries for April, $3,500. 7. Pay dividends to stockholders, $2,000. Using the external transactions above, compute the balance of Retained Earnings at April 30.

Question

Maeve Gaines

Business

28 November, 19:45

At the beginning of April, Owl Corporation has a balance of $13,000 in the Retained Earnings account. During the month of April, Owl had the following external transactions. 1. Issue common stock for cash, $11,000. 2. Provide services to customers on account, $8,500. 3. Provide services to customers in exchange for cash, $3,200. 4. Purchase equipment and pay cash, $7,600. 5. Pay rent for April, $1,100. 6. Pay employee salaries for April, $3,500. 7. Pay dividends to stockholders, $2,000. Using the external transactions above, compute the balance of Retained Earnings at April 30.

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Khalil Reed · Answer 1

The part of net income not paid as dividend is included in retain earning account. Its balance is reported in balance sheet.

To calculate retain earning balance we will first calculate net income for the year. After calculation of net income we will add retain earning opening balance in it and deduct dividend paid from it. Detail calculations are given below.

Net income Calculation

Service income (8,500 + 3,200) = 11,700

Rent expense (1,100)

Salaries expense (3,500)

Net income 7,100

Retain earning

Net income 7,100

Pay dividend (2,000)

Retain earning opening balance 13,000

Retain earning closing balance $ 18,100