Petras Company engaged in the following transactions during 2012, its first year

Question

Petras Company engaged in the following transactions during 2012, its first year in operations: (Assume all transactions are cash transactions)

1) Acquired $1,050 cash from the issue of common stock.
2) Borrowed $520 from a bank.
3) Earned $700 of revenues.
4) Paid expenses of $270.
5) Paid a $70 dividend.

During 2013, Petras engaged in the following transactions: (Assume all transactions are cash transactions)

1) Issued an additional $425 of common stock.
2) Repaid $290 of its debt to the bank.
3) Earned revenues of $850.
4) Incurred expenses of $400.
5) Paid dividends of $120.

The amount of retained earnings on Petras's 2013 balance sheet is

Multiple Choice

$810.

$690.

$1,030.

$1,075.

Explanation / Answer

2012 Revenue earned 700 Less: Expenses -270 Net Income 430 Less: Dividend -70 Addition to retained earnings 360 2013 Revenue earned 850 Less: Expenses -400 Net Income 450 Less: Dividend -120 Addition to retained earnings 330 Retained earnings op balance 0 Add: 2012 addition 360 2013 addition 330 Retained earnings 2013 balance 690 Ans is B

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