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Chapter 4: Q2SE (page 217)

Refer to the data in Short Exercise S4-1. Prepare Dalton’s statement of retained earnings for the year ended December 31, 2018.

Short Answer

Expert verified

Statement of retained earnings is shown as follows:

DALTON HAIR STYLISTS

Statement of Retained Earnings

Year Ended December 31, 2018

Retained Earnings, January 1, 2018

$0

Net income for the year

4,550

4,550

Dividends

(1,400)

Retained Earnings, December 31, 2018

$3,150

Step by step solution

01

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 change in retained earnings

The beginning balance of the retained earnings equals $0, and the ending balance of retained earnings equals $3,150. Net income of $4,550 is added and dividends of $1,400 is subtracted from the beginning balance of retained earnings, to estimate ending balance of retained earnings.

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Most popular questions from this chapter

What does the balance sheet report?

The unadjusted trial balance of Farish Investment Advisers at December 31, 2018, follows: Adjustment data at December 31, 2018: a. Unearned Revenue earned during the year, \(800. b. Office Supplies on hand, \)4,500. c. Depreciation for the year, \(4,500. d. Accrued Salaries Expense, \)5,000. e. Accrued Service Revenue, \(6,500. Requirements 1. Prepare a worksheet for Farish Investment Advisers at December 31, 2018. 2. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in account format. 3. Prepare closing entries. Account Title Office Supplies Cash Debit Credit Accounts Receivable Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Notes Payable (long-term) Dividends Service Revenue Insurance Expense Salaries Expense Supplies Expense Interest Expense Rent Expense Balance \) 30,000 \( 198,000 \) 198,000 5,500 $ 9,000 13,000 27,000 21,000 93,000 Retained Earnings 29,500 29,000 2,500 40,000 5,500 5,000 51,000 7,000 28,000 Depreciation Expense—Equipment Total FARISH INVESTMENT ADVISERS Unadjusted Trial Balance December 31, 2018

For each account listed, identify whether the account would appear in either the income statement section or the balance sheet section of the worksheet. Assuming normal balances, identify if the account would be recorded in the debit (DR) or credit (CR) column.

13. Accumulated Depreciation—Building

If a business had a net loss for the year, what would be the closing entry to close Income Summary and transfer the net loss to the Retained Earnings account?

What are temporary accounts? Are temporary accounts closed in the closing process?
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