Service Revenue 12,000 Question 15 (4 points) Ashley\'s Accessory Shop started t

Question

Service Revenue 12,000 Question 15 (4 points) Ashley's Accessory Shop started the year with total assets of $70,000, total liabilities of $40,000, and common stock of $25,000. During the year the business recorded $110,000 in revenues, $55,000 in expenses, and dividends of $20,000. Retained earnings at the end of the year was O $60,000 O $40,000 O $65,000 O $35,000 Question 16 (4 points) The ledger of Mariah Company reports that Assets are $80,000, Liabilities are $36,000, and Retained Eamings are $12,000. What is the balance in the Common Stock account?

Explanation / Answer

15.

Retained earnings at the begining of the year

= Total assets - Total liabilities - Common stock

= $70,000 - $40,000 - $25,000

= $5,000

Net income for the year

= Total revenues - Total expenses

= $110,000 - $55,000

= $55,000

Therefore,

Retained earnings at the end of the year

= Retained earnings at beginning of the year + Net income - Dividends

= $5,000 + $55,000 - $20,000

= $40,000

The correct answer is $40,000.

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