A merchandiser uses a perpetual inventory system.The beginning Retained Earnings balance of a merchandiser was $100,000.During the year,sales revenue amounted to $75,000,sales returns and allowances were $1,000,sales discounts were $3,000,cost of goods sold was $40,000,and all other expenses totaled $10,000.The company declared and paid $25,000 as dividends.The closing balance of Retained Earnings would be ________.
A)$99,000
B)$96,000
C)$90,000
D)$100,000

Question

Quizplus · Accepted Answer

The formula to calculate the ending balance of Retained Earnings is:
Beginning Retained Earnings + Net Income - Dividends
Net Income = Sales Revenue - (Cost of Goods Sold + Expenses + Sales Returns and Allowances + Sales Discounts)
Net Income = $75,000 - ($40,000 + $10,000 + $1,000 + $3,000) = $21,000
Ending Retained Earnings = $100,000 + $21,000 - $25,000 = $96,000

A Merchandiser Uses a Perpetual Inventory System