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Use the following information for exercise 15 to 18 LO P2 [The following information applies to the questions displayed below.] On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,220 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts. Retained earnings, October 1 as $0. Cash $ 13,840 Cash dividends $ 1,280 Accounts receivable 13,140 Consulting revenue 13,140 Office supplies 2,530 Rent expense 2,770 Land 45,840 Salaries expense 6,120 Office equipment 17,200 Telephone expense 820 Accounts payable 7,810 Miscellaneous expenses 630 Common stock 83,220 Exercise 1-16 Preparing a statement of retained earnings LO P2 Using the above information prepare an October statement of retained earnings for Ernst Consulting.

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Answer:

October Retained Income Statement

Beginning Balance                                      $0

Add Profit / Loss for the month              $2,800

Less Dividends for the month               ($ 1,280)

Ending Balance                                       $1,520

Explanation:

First prepare the Income Statement. This will give us the Profit or loss amount to include in the Retained Income Statement.

October Income Statement

Consulting revenue                          $ 13,140

Less Expenses :

Rent expense                    $ 2,770

Salaries expense              $  6,120

Telephone expense           $  820

Miscellaneous expenses   $  630  ($10,340)

Net Income / (Loss)                           $2,800

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