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    dwhalloway0's Avatar
    dwhalloway0 Posts: 1, Reputation: 1
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    #1

    Sep 5, 2007, 01:05 PM
    Retained Earnings
    Hi! I suck at accounting and I don't know what I am doing... I have to find the retained earnings for two different occasions...

    1. After one year of business, Holt's Computer Repair Inc. had 6,000 in assets, 3,500 in liabilities, and 1,000 in contributed capital. What is the retained earnings after one year of business?

    I said...

    6000=3,500 + 1,000 + x
    retained earnings= 2,500

    or assets-liabilities=RE
    6,000-3,500=2,500

    so for the first one I got 2,500 as the retained earnings! Is that correct? Help please!



    2. Joe's Repair Shop had a retained earnings balance of 1,000 on December 31, 2008. For the year 2009, sales were 12,000 and expenses were 8,500. Cash dividends of 2,000 were distributed on December 31, 2009. What was the amount of retained earnings on December 31, 2009?


    I did 12,000 - 8,500 - 2,000

    1,500 + 1000 from retained earnings from previous year.

    so retained earnings again as 2,500...

    I know I am completely off! Can someone please help? Its greatly appreciate it! Thanks
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #2

    Sep 6, 2007, 05:46 AM
    1)
    Your first calculation is right, but you added/subtracted the numbers wrong.

    6,000 = 3,500 + 1,000 + Retained Earnings
    Retained Earnings = 6,000 – 3,500 – 1,000
    Retained Earnings = 1,500

    Now, to check to make sure.

    1,5000 + 1,000 + 3,500 = 6,000



    2)
    Net Income = Sales – Expenses = 12,000 – 8,500 = 3,500

    Retained Earnings Jan 1, 2009 = 1,000
    Plus Net Income 3,500
    Less Dividends 2,000
    Retained Earnings, Dec. 31, 2009 = 2,500

    You are correct, 2,500 in this case.
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