Financial Accounting I
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PU 2014 Q. No. 8
Given the following information at the end of the year, what is the balance in retained earnings at the beginning of the year? [ 2 ]
Total assets = Rs. 1,90,000
Total liabilities = 1,10,000
Contributed capital = 30,000
Revenues = 85,000
Expenses =70,000
solution:
We have,
Assets + expenses + losses + drawing = liabilities + owners equity (contributed capital + retained earnings) + revenues + gains
1,90,000 + 70,000 = 1,10,000 + 30,000 + Retained earnings + 85,000
Retained earnings = Rs. 35,000
Therefore, beginning balance of retained earnings = Rs. 35,000.
PU 2015 Fall Q. No. 9
Calculation of cost of goods sold (COGS)
| Beginning stock Add: Purchase Transportation | 2,30,000 12,50,000 50,000 |
| Cost of goods available for sale Less: Ending stock | 15,30,000 60,000 |
| Cost of goods sold | Rs. 14,70,000 |
PU 2015 Spring Q. No. 10
London Corporation was organized on January 2, 2009, with the investment of Rs. 1,00,000 by each of its two stockholder’s. Net income for its first year of business was Rs. 85,200.
Required: A statement of Retained Earnings for the year end Dec. 31, 2011.
Solution:
London Corporation
Statement of Retained Earnings (R/E)
Dec. 31, 2011
| Particulars | 2009 | 2010 | 2011 |
| Beginning balance of R/E Add: net income | – 85,200 | 45,200 1,25,320 | 1,30,520 1,45,480 |
| Total Profit Less: Dividend paid | 85,200 40,000 | 1,70,520 40,000 | 2,76,000 40,000 |
| Ending balance of retained earnings | 45,200 | 1,30,520 | 2,36,000 |
Therefore, Ending balance of retained earnings for year 2011 = Rs. 2,36,000.
PU 2017 Fall Q. No. 7
A company has total assets of Rs. 1,00,000 and liabilities of Rs, 1,20,000 at the beginning of the year. During the year its shareholder’s equity increased to Rs. 2,00,000. What is
Solution:
We have,
Assets = Liabilities + Shareholder’s equity
2,50,000 = 1,20,000 + Shareholder’s equity
i.e. Beginning balance of retained earnings = Rs. 1,30,000
Ending balance of shareholder’s equity = Rs. 2,00,000
Dividend paid = Rs. 30,000
Now,
Ending balance of retained earnings = Beginning balance of retained earnings + net income – dividend paid
2,00,000 = 1,30,000 + net income – 30,000
Net income = Rs. 1,00,000
PU 2017 Fall Q. No. 8
A company earned Rs. 1,00,000 profit for a year and distributed dividend of Rs. 20,000 during the year. At the end of the year,
Solution:
Opening balance of retained earnings = Ending balance of retained earnings + dividend – net income
Opening balance of retained earnings = 1,50,000 + 20,000 – 1,00,000
Opening balance of retained earnings = Rs. 70,000
PU 2018 Fall Q. No. 8 / PU 2014 Spring Q. No. 8
Burlin Company starts the year with Rs. 1,00,000 in assets and Rs. 80,000 in liabilities. Net income for the year is Rs. 25,000, and no dividends are paid. How much its owner’s equity at the end of the year? [ 2 ]
Solution:
Beginning balance of owner’s equity = Assets – liabilities = 20,000
Net income = Rs. 25,000
Ending balance of retained earnings = Beginning balance of retained earnings + net income
Ending balance of retained earnings = 20,000 + 25,000 = Rs. 45,000
PU 2018 Spring Q. No. 10 [ 2 ]
From the following information prepare a statement of retained earnings:
| Opening retained earnings | Rs. 5,000 | Dividend paid | Rs. 4,000 |
| Transfer to general reserve | Rs. 2,000 | Net income | Rs. 7,500 |
Solution:
Statement of Retained Earnings
| Particulars | Amount Rs. |
| Beginning balance of retained earnings Add: Net income | 5,000 7,500 |
| Earnings available to shareholders Less: Dividend | 12,500 4,000 2,000 |
| Ending balance of retained earnings | Rs. 6,500 |