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    Krissy57af's Avatar
    Krissy57af Posts: 2, Reputation: 1
    New Member

    Oct 4, 2009, 11:14 AM
    Finding total revenue with limited info
    Green Company reported the following amounts at the end of its first year of operations:
    Contributed Capital $30,000
    Total Expenses $61,000
    Total Assets $90,000
    Dividends $16,000
    Total Liabilities $25,000
    Calculate the total revenues earned by Green Company during its first year of operations"

    I am trying to use the equation revenues-expenses=net income since expenses are given, I need to find net income before I can solve for revenues.
    I used assets=liabilites+equity to solve for equity and got $65,000.
    Since Equity is contributed capital plus retained earnings I solved for retained earnings and got $35,000. Since the information given in the problem was from the end of the year (Dec 31), this would be the ending retained earnings correct? How do I find the beginning retained earnings so I can figure out net income?
    The only other equation we've been given so far is: Beginning retained earnings+net income-dividends=ending retained earnings.
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
    Senior Member

    Oct 4, 2009, 01:57 PM
    Quote Originally Posted by Krissy57af View Post
    I used assets=liabilites+equity to solve for equity and got $65,000.
    You're off to a good start, Krissy.

    You're also correct that ending Retained Earnings must be 35K. One thing to consider, though, is that Retained Earnings is reduced by Dividends. The "Retained Earnings" equation plays out like this...

    [Beginning RE] + [Net Income (or minus Net Loss)] - [Dividends] = [Ending RE]

    Since this is the company's initial year, Beginning RE is zero. With this, plus what's been given, and tossing in what you've calculated yourself, this equation becomes

    0 + [Net Income] - 16 = 35 (all in thousands, of course). Use that to find Net Income, then use your

    Net Income = Revenues minus Expenses equation to wrap it up.

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