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13 August, 09:55

The Retained earnings account has a credit balance of $34,000 before closing entries are made. If total revenues for the period are $105,200, total expenses are $77,800, and dividends are $18,000, what is the ending balance in the Retained earnings account after all closing entries are made

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  1. 13 August, 10:17
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    The ending balance of retained earnings account is $43,400.

    Explanation:

    Simply put, retained earnings are an amount of net income left after payment of dividends to shareholders. This amount accumulates over time period as the company retains profit for its operations. Usually, it is arrived at using the formula below:

    Retained earnings = Opening balance + Net income (or loss) - Cash dividends - Stock dividends

    At the instance of the question, retained earnings = $34,000 + $27,400 ($105,200 - $77,800) - $18,000 = $43,400.
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