ABC Corporation had the following accounts and balances during the year:
Service Revenue, $26,400; Rent Expense, $2,400; Wages Expense, $16,680; Ad Expense, $2,700; Utilities Expense, $1,800; Income Tax Expense, $400; and Dividends, $1,400. In addition, the year-end balances of selected accounts were as follows: Cash $3,100; Accts Rec. $1,500; Supplies, $200; Land, $2,000; Acct Payable, $900; and Common Stock, $2,000.
I’m having difficulty solving the Retained Earnings. Also the Cash amount in the Balance Sheet. Here is what I have so far…
Income Statement
Revenue
Service Revenue $26,400
Expenses
Rent $2,400
Wages $16,680
Ads $2,700
Utilities $1,800
TTL EXP = $23,580
Income before taxes $2,420
Taxes = $400
Net Income $2,020

Retained Earnings
Retained Earnings 12/31/10 $_____
Net Income $2,020
Subtotal $_____
Less Dividends $700
TTL Retained Earnings = $_____

Balance Sheet
Assets Liabilities
Cash $_____ Accts. Payable $900
Accts. Rec. $1,500 Stockholders Equity
Supplies $200 Common Stock $2,000
Land $2,000 Retained Earnings $____

Total Assets Total Liabilities & Stockholders’ Equity
$_____ $_____ If RE = Revenues – (Expenses + Dividends), I am at a loss to balance this out & would appreciate an
Explanation & Answer.

Thanks-DATALIVES

26,400 - 23,580 = 2820. I think you probably had already subtracted the tax off that, had the final number of 2420 and then plugged it in the wrong place?

But I can't make it balance either even with the correct net income.

No reason to leave the cash blank since it was given. And dividends are 1400, not 700. But still, I'm 2880 off and don't know why.

You may want to check the problem for two things: one, just to make sure that all the numbers are correct and that everything is included. Second, if this is a new company which started business this year (meaning 0 beginning balance in retained earnings), and that they aren't requiring you to solve for a beginning balance in retained earnings.

We need 3900 in retained earnings for it to balance. The only way that can happen is if there was a beginning balance.