Atlantic Corporation reported the following amounts at the end of the first year

Question

Atlantic Corporation reported the following amounts at the end of the first year of operations: common stock $250,000; sales revenue $920,000; total assets $720,000; dividends declared $63,000; and total liabilities $400,000. What are Atlantics' retained earnings at the end of the year and what amount of expenses were incurred during the year?

A. Retained earnings are $70,000 and expenses incurred totaled $787,000.

B. Retained earnings are $320,000 and expenses incurred totaled $600,000.

C. Retained earnings are $70,000 and expenses incurred totaled $850,000.

D. Retained earnings are $320,000 and expenses incurred totaled $570,000.

Explanation / Answer

stockholders' equity ($720,000 -$400,000) = Contributed capital ($250,000) + Retained earnings(70,000)

.Retained earnings ($70,000) = Net income ($133,000 - Dividends ($63,000).

Net income ($133,000) = Sales Revenue ($920,000) - Expenses ($787,000).

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