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Chapter 1: Q 35E (page 42)

Prepare the statement of retained earnings for Damon Design Studio for the year ending December 31, 2018.

Short Answer

Expert verified

Statement of retained earnings is shown as follows:

Damon Design Studio

Statement of Retained Earnings

Year Ended December 31, 2018

Retained Earnings, January 1, 2018

$39,000

Net income for the year

53,400

92,400

Dividends

(57,000)

Retained Earnings, December 31, 2018

$35,400

Step by step solution

01

Step-by-Step-SolutionStep 1: Explanation on the statement of retained earnings

Statement of retained earnings represents the net change in the retained earnings due to income and dividend.

02

Explanation on retained earnings

Retained earnings are the accumulated profits of the prior or previous years.

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Most popular questions from this chapter

Annette Pachelo recently opened her own law office on March 1, which she operates as a corporation. The name of the new entity is Annette Pachelo, Attorney. Pachelo experienced the following events during the organizing phase of the new business and its first month of operation, March 2018. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business. Mar. 1 Sold personal investment in Amazon stock, which she had owned for several years, receiving \(35,000 cash. 2 Deposited the \)35,000 cash from the sale of the Amazon stock in her personal bank account. 3 Deposited \(73,000 cash in a new business bank account titled Annette Pachelo, Attorney. The business issued common stock to Pachelo. 5 Paid \)700 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, \(5,000, within three months. 9 Received \)2,800 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, \(400. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, \)10,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, \(1,200. 31 Received \)3,300 cash from clients billed on March 23. 31 Cash dividends of $5,500 were paid to stockholders. Requirements 1. Analyze the effects of the preceding events on the accounting equation of Annette Pachelo, Attorney. Use a format similar to Exhibit 1-6.

Which concept states that accounting information should be complete, neutral, and free from material error?

The records of Felix Company show the following at December 31, 2018:

Assets & Liabilities: Equity:

Beginning: Common Stock \( 11,000

Assets \) 67,000 Dividends 8,000

Liabilities 11,000 Revenues 205,000

Ending: Expenses ?

Assets $ 46,000 Retained Earnings, January 1, 2018 45,000

Liabilities 34,000

Requirements 1. Compute the missing amount for Felix Company. You will need to determine Retained Earnings, December 31, 2018, and total stockholders’ equity, December 31, 2018. 2. Did Felix earn a net income or suffer a net loss for the year? Compute the amount.

What are the steps used when analyzing a business transaction?

Mountain Drycleaners started 2018 with total assets of \(19,000 and total liabilities of \)14,000. At the end of 2018, Mountain’s total assets stood at \(12,000 and total liabilities were \)9,000. Requirements 1. Did the stockholders’ equity of Mountain Drycleaners increase or decrease during 2018? By how much? 2. Identify the four possible reasons that stockholders’ equity can change
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