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20 May, 03:08

At the beginning of the year, Sigma Company's balance sheet reported Total Assets of $195,000; Total Liabilities of $15,000; and Total Paid-in capital of $60,000. During the year, the company reported total revenues of $226,000 and expenses of $175,000. Also, dividends during the year totaled $48,000. Assuming no other changes to Retained earnings, the balance in the Retained earnings account at the end of the year would be:

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  1. 20 May, 03:27
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    Answer: Assuming no other changes to Retained earnings, the balance in the Retained earnings account at the end of the year would be: $123000.

    Explanation: First we must calculate the accumulated earnings to date with the equity equation: Assets = Liabilities + Equity

    We know that equity is made up of capital + retained earnings.

    If the asset is 195,000, the Liability 15,000 and the capital 60000

    195000 = 15000 + 60000

    195000 = 75000

    195000 - 75000 = Retained earnings

    $ 120000 = Retained earnings.

    The result of the year is Income - expenses

    226000 - 175000 = $ 51000.

    Then the company's total earnings are retained earnings + Profit for the year = 120000 + 51000 = 171000.

    We subtract the distribution of dividends and obtain the balance of the retained earnings account: 171000 - 48000 = $123000.
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