On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner co

Question

On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $84,000 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts. Cash $ 11,360 Cash dividends $ 2,000 Accounts receivable 14,000 Consulting revenue 14,000 Office supplies 3,250 Rent expense 3,550 Land 46,000 Salaries expense 7,000 Office equipment 18,000 Telephone expense 760 Accounts payable 8,500 Miscellaneous expenses 580 Common Stock 84,000 Exercise 1-16 Preparing a statement of retained earnings LO P2 Using the above information prepare an October statement of retained earnings for Ernst Consulting.

Explanation / Answer

Prepare statement of retained earnings :

Net income = 14000-3550-7000-760-580 = 2110

Beginning retained earnings 0 Add: Net income 2110 Less: Cash dividend -2000 Ending retained earnings 110

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