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28 January, 11:09

Sammy's Pizza opened on January 1, 2018. Sammy's reported the following for cash revenues and cash expenses for the years 2018 to 2020 2018 2019 2020 Cash Revenues $19,000 $29,000 $39,000 Cash Expenses $10,500 $13,500 $21,500

Required:

a. What would Sammy's Pizza report for net income and retained earnings for the years 2018, 2019, and 2020?

b. Assume that Sammy's Pizza paid a $4,750 dividend to stockholders in 2019. What would Sammy's Pizza report for net income and retained earnings for 2019 and 2020?

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Answers (1)
  1. 28 January, 11:32
    0
    (a) 2018:

    Net income:

    = Cash revenue - Cash expenses

    = $19,000 - $10,500

    = $8,500

    Retained earnings = $8,500

    2019:

    Net income:

    = Cash revenue - Cash expenses

    = $29,000 - $13,500

    = $15,500

    Retained earnings = $8,500 + $15,500

    = $24,000

    2020:

    Net income:

    = Cash revenue - Cash expenses

    = $39,000 - $21,500

    = $17,500

    Retained earnings = $24,000 + $17,500

    = $41,500

    (b) 2019:

    Net income:

    = Cash revenue - Cash expenses

    = $29,000 - $13,500

    = $15,500

    Retained earnings = $8,500 + $15,500 - $4,750

    = $19,250

    2020:

    Net income:

    = Cash revenue - Cash expenses

    = $39,000 - $21,500

    = $17,500

    Retained earnings = $19,250 + $17,500

    = $36,750
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