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9 June, 16:28

As of December 31, Year 1, Flowers Company had total assets of $220,000, total liabilities of $66,000, and common stock of $110,000. The company's Year 1 income statement contained revenue of $40,000 and expenses of $23,000. The Year 1 statement of changes in stockholders' equity stated that $3,200 of dividends were paid to investors. Required a. Determine the before-closing balance in the Retained Earnings account on December 31, Year 1. b. Determine the after-closing balance in the Retained Earnings account on December 31, Year 1. c. Determine the before-closing balances in the Revenue, Expense, and Dividend accounts on December 31, Year 1. d. Determine the after-closing balances in the Revenue, Expense, and Dividend accounts on December 31, Year 1.

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  1. 9 June, 17:57
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    (b) After-closing balance in the Retained Earnings account on December 31, Year 1,

    Total Stockholder's equity = Total assets - Total liabilities

    = $220,000 - $66,000

    = $154,000

    After-closing balance of Retained Earnings = Total Stockholder's equity - Common stock

    = $154,000 - $110,000

    = $44,000

    (a) Before-closing balance in the Retained Earnings account on December 31, Year 1.

    Net Income = Revenue - Expenses

    = $40,000 - $23,000

    = $17,000

    Before-closing balance of Retained Earnings:

    = After-closing balance of Retained Earnings + Dividend paid - Net Income

    = $44,000 + $3,200 - $17,000

    = $30,200

    (c) Before-closing balances in the following accounts:

    Revenue = $40,000

    Expenses = $23,000

    Dividend = $3,200

    (d) After-closing balances in the following accounts:

    Revenue = $0

    Expenses = $0

    Dividend = $0

    Because revenue and expenses are transferred to income statement and dividend are transferred to retained earnings.
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