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27 September, 18:46

At the beginning of Year 2, Oak Consulting had the following normal balances in its accounts:

Account Balance

Cash $29,400

Accounts receivable 21,600

Accounts payable 12,000

Common stock 28,300

Retained earnings 10,700

The following events apply to Oak Consulting for Year 2:

Provided $68,400 of services on account.

Incurred $3,100 of operating expenses on account.

Collected $47,400 of accounts receivable.

Paid $31,100 cash for salaries expense.

Paid $13,590 cash as a partial payment on accounts payable.

Paid a $8,500 cash dividend to the stockholders.

Required:

a. What is the amount of net income for the year?

b. What is the amount of change in retained earnings for the year?

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Answers (1)
  1. 27 September, 20:16
    0
    a. What is the amount of net income for the year?

    $34,190

    b. What is the amount of change in retained earnings for the year?

    increased by $25,690

    Explanation:

    net income:

    total service revenue $68,400 salaries expense - $31,100 operating expenses - $3,100 net income = $34,190

    change in retained earnings = net income - dividends = $34,190 - $8,500 = $25,690

    Revenue and expenses are recorded on the periods that they occur, regardless of when they are collected or paid respectively.
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