Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)1) Acquired $1,900 cash from the issue of common stock.2) Borrowed $1,370 from a bank.3) Earned $1,550 of revenues cash.4) Paid expenses of $440.5) Paid a $240 dividend.During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.)1) Issued an additional $1,275 of common stock.2) Repaid $885 of its debt to the bank.3) Earned revenues of $1,700 cash.4) Incurred expenses of $740.5) Paid dividends of $290.What is Packard's retained earnings account balance at the end of Year 1 before the process of closing the accounts has been undertaken?
A) $1,110.
B) $0
C) $870.
D) $1,210.

Question

Quizplus · Accepted Answer

Retained Earnings is the accumulation of all earnings (revenues minus expenses) since the company's inception minus any dividends paid. Packard has only been in operation for Year 1, so at the end of Year 1, there are no accumulated earnings to be retained. Therefore, the retained earnings account balance is $0.

Packard Company Engaged in the Following Transactions During Year 1