posted by Cheryl
I'm not sure how to work this oroblem. Can someone assist me. revenues of $230,000 and expenses, including income taxes, of $190,000. On December 31, 2005, Edgemont had assets of $350,000, liabilities of $80,000, and capital stock of $210,000. Edgemont paid a cash dividend of $25,000 in 2006. No additional stock was issued. Compute the retained earnings on December 31, 2005, and 2006
Accounting is not my area. However, as I read your question, the firm had 230,000 revenue, 190,000 expenses, for a net profit after tax of 40,000. It paid 25,000 in dividends. Thus, retained earnings must be 15,000. As I see it, assets, liabilities and capital stock amounts are red herrings in your problem.