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managementaccounting_retainedearningscomputations_4

managementaccounting_retainedearningscomputations_4

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Computation of Retained Earnings.
Computation of Retained Earnings.

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Published by: ClassOf1.com on Jul 08, 2009
Copyright:Attribution Non-commercial

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05/11/2014

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Sub: Accounts
Topic: ManagementAccounting
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Question:
Retained Earnings Computations:

During 2006, Edgemont Corporation had 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.

Solution:
Edgemont Corporation
On December 31, 2005
Assets
Liabilities and Owners' Equity
Assets
350000 Liabilities
80000
Owners' Equity
Capital Stock
210000
Retained Earnings
60000
Total
Assets
350000
Total Liabilities and Owners'
Equity
350000
On December 31, 2006
Income Statement
Revenues =
$
230,000
Expenses and Taxes
$
190,000
Net Income
=
$
40,000

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