The following information was drawn from the accounting records of Kwon Company as of December 31, 2012, before the temporary accounts had been closed. The Cash balance was $4,000, and Notes Payable amounted to $2,000. The company had revenues of $6,000 and expenses of $3,500. The company's Land account had a $9,000 balance. Dividends amounted to $500. There was $6,000 of common stock issued

Question

The following information was drawn from the accounting records of Kwon Company as of December 31, 2012, before the temporary accounts had been closed. The Cash balance was $4,000, and Notes Payable amounted to $2,000. The company had revenues of $6,000 and expenses of $3,500. The company's Land account had a $9,000 balance. Dividends amounted to $500. There was $6,000 of common stock issued

Answer 1

To find the retained earnings for Kwon Company as of December 31, 2012, we need to calculate the Net Income and then adjust for dividends.

To calculate Net Income, subtract the total expenses from the total revenue. In this case, the total revenue is $6,000 and the total expenses are $3,500. So, Net Income = $6,000 - $3,500 = $2,500.

Next, we need to adjust for the dividends. Dividends represent a distribution of profits to the shareholders and are deducted from the retained earnings. In this case, dividends amount to $500.

So, to find the retained earnings, we need to subtract the dividends from the net income. Retained Earnings = Net Income - Dividends = $2,500 - $500 = $2,000.

Therefore, the retained earnings for Kwon Company as of December 31, 2012, is $2,000.