Can some one explain how and why the retained earning (show calculation) is 6,52
ID: 2436770 • Letter: C
Question
Can some one explain how and why the retained earning (show calculation) is 6,520?
M4-12 Recording Closing Entries LO4-4
Romney's Marketing Company has the following adjusted trial balance at the end of the current year. No dividends were declared. However, 590 shares ($0.10 par value per share) issued at the end of the year for $3,000 are included below: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Debit Credit Cash $ 1,460 Accounts receivable 2,210 Interest receivable 280 Prepaid insurance 1,750 Notes receivable (long-term) 2,850 Equipment 16,900 Accumulated depreciation $ 3,190 Accounts payable 2,280 Accrued expenses payable 3,810 Income taxes payable 2,500 Unearned rent revenue 450 Common Stock (810 shares) 81 Additional paid-in capital 3,459 Retained earnings 3,160 Sales revenue 39,450 Interest revenue 160 Rent revenue 790 Wages expense 20,500 Depreciation expense 1,790 Utilities expense 220 Insurance expense 610 Rent expense 8,000 Income tax expense 2,760 Total $ 59,330 $ 59,330 Prepare the closing entry at the end of the current year 0 Transaction General Journal Debit Credit Sales revenue Rent revenue Interest revenue 39,450 O 790 160 Utilities expense Depreciation expense Wages expense Rent expense Insurance expense Income tax expense Retained earnings 220 1,790 20,500 8,000 610 2,760 6,520Explanation / Answer
Excess of revenue over expenses should be transferred to retained earnings account while preparing the closing entry.
Amount to be transferred to retained earnings = Total Revenues - Total expenses
= (Sales revenue + Rent revenue + Interest revenue) - (Utilities expense +Depreciation expense +Wages Expense +Rent expense + Insurance expense + Income tax expense)
=(39,450+790+160) - (220+1,790+20,500+8,000+610+2,760)
=40,400-33,880
= 6,520 (This income should be transferred to retained earnings)
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