Q32E - Horngren'S Financial And Managerial Accounting

Question

Preparing the statement of retained earnings Requirements 1. Prepare the statement of retained earnings for Wilson Towing Service for the month ending June 30, 2018. 2. What does the statement of retained earnings report?

Step-by-Step Solution

Answer

(1) Statement of retained earnings is shown as follows:

Wilson Towing Service
Statement of Retained Earnings
Year Ended June 30, 2018
Retained Earnings, June 1, 2018	$3,250
Net income for the year	11,700
	14,950
Dividends	(3,500)
Retained Earnings, December 31, 2018	$11,450

(2) Statement of retained earnings reports changes in the beginning balance of retained earnings. 

Step-by-Step-Solution Step 1: Explanation on the statement of retained earnings

Statement of retained earnings represents the net change in the retained earnings due to income and dividend.

Step 2: Explanation on retained earnings

Retained earnings are the accumulated profits of the prior or previous years.