Retained Earnings Statement

The revenues and expenses of Paradise Travel Service for the year ended May 31, 2018, follow:

Fees earned $900,000

Office expense 300,000

Miscellaneous expense 15,000

Wages expense 450,000

Prepare a retained earnings statement for the year ended May 31, 2018.

Everett McCauley invested an additional $40,000 in the business in exchange for common stock, and $10,000 of dividends were paid during the year. Retained earnings as of June 1, 2017, were $300,000.

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ijaz4308 ijaz4308 · Answer 1 · 2020-01-26T10:09:00+01:00

Answer:

$425,000

Explanation:

The Retained earning statement of the Paradise travel can be calculated using the following formula:

Closing Retained earnings=opening retained earnings+net income-dividend paid

opening retained earnings=$300,000

Net income=Fees earned-office expense- miscellaneous expense-wages expense

Net income=900,000-300,000-15,000-450,000=$135,000

Dividends paid=$10,000

Closing retained earnings=$300,000+$135,000-$10,000

=$425,000