Atlantic Corporation reported the following amounts at the end of the first year
ID: 2453402 • Letter: A
Question
Atlantic Corporation reported the following amounts at the end of the first year of operations: common stock $170,000; sales revenue $770,000; total assets $570,000; dividends declared $48,000; and total liabilities $330,000. What are Atlantics' retained earnings at the end of the year and what amount of expenses were incurred during the year?
a. Retained earnings are $70,000 and expenses incurred totaled $700,000.
b. Retained earnings are $240,000 and expenses incurred totaled $530,000.
c. Retained earnings are $70,000 and expenses incurred totaled $652,000.
d. Retained earnings are $240,000 and expenses incurred totaled $410,000.
Atlantic Corporation reported the following amounts at the end of the first year of operations: common stock $170,000; sales revenue $770,000; total assets $570,000; dividends declared $48,000; and total liabilities $330,000. What are Atlantics' retained earnings at the end of the year and what amount of expenses were incurred during the year?
Explanation / Answer
Answer:
Correct Answer is c. Retained earnings are $70,000 and expenses incurred totaled $652,000.
Working and calculation is as follows:
Total Assets = Common Stock + Total Liabilities + Retained Earnings (Reserve & Surplus)
$570,000 = $170,000 + $330,000 + Retained Earnings
Retained Earnings = $570,000 - $5,00,000 = $70,000
Retained Earnings = Sales Revenue – Total Expenses incurred during the year – Dividend Declared
$70,000 = $770,000 – Total Expenses incurred during the year - $48,000
Total Expenses incurred during the year = $770,000 - $48,000 - $70,000 = $652,000
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