As of January 1, Retained Earnings had a credit balance of $314,000. During the year, dividends totaled $10,000, and the business incurred a net loss of $320,000.
a. Compute the balance of Retained Earnings as of the end of the year.
b. Assuming that there have been no recording errors, will the balance sheet prepared at December 31 balance? Explain.
Answer:
a. Debit (negative) balance of $16,000 ($314,000 – $10,000 – $320,000). This negative balance means that the liabilities of Waters' business exceed the assets.
b. Yes. The balance sheet prepared at December 31 will balance, with Retained Earnings being reported in the stockholders’ equity section as a debit
No comments:
Post a Comment