At the beginning of Year 2, Oak Consulting had the following normal balances in its accounts:

Account Balance

Cash $29,400

Accounts receivable 21,600

Accounts payable 12,000

Common stock 28,300

Retained earnings 10,700

The following events apply to Oak Consulting for Year 2:

Provided $68,400 of services on account.

Incurred $3,100 of operating expenses on account.

Collected $47,400 of accounts receivable.

Paid $31,100 cash for salaries expense.

Paid $13,590 cash as a partial payment on accounts payable.

Paid a $8,500 cash dividend to the stockholders.

Required:

a. What is the amount of net income for the year?

b. What is the amount of change in retained earnings for the year?

Question

Business

Christina Singleton

19 April, 05:09

At the beginning of Year 2, Oak Consulting had the following normal balances in its accounts:

Account Balance

Cash $29,400

Accounts receivable 21,600

Accounts payable 12,000

Common stock 28,300

Retained earnings 10,700

The following events apply to Oak Consulting for Year 2:

Provided $68,400 of services on account.

Incurred $3,100 of operating expenses on account.

Collected $47,400 of accounts receivable.

Paid $31,100 cash for salaries expense.

Paid $13,590 cash as a partial payment on accounts payable.

Paid a $8,500 cash dividend to the stockholders.

Required:

a. What is the amount of net income for the year?

b. What is the amount of change in retained earnings for the year?

+4

Answers (1)

Know the Answer?

Caroline Rivers · Answer 1

a. What is the amount of net income for the year?

$34,190

b. What is the amount of change in retained earnings for the year?

increased by $25,690

Explanation:

net income:

total service revenue $68,400 salaries expense - $31,100 operating expenses - $3,100 net income = $34,190

change in retained earnings = net income - dividends = $34,190 - $8,500 = $25,690

Revenue and expenses are recorded on the periods that they occur, regardless of when they are collected or paid respectively.