As of december 31, year 1, flowers company had total assets of $220,000, total liabilities of $66,000, and common stock of $110,000. the company’s year 1 income statement contained revenue of $40,000 and expenses of $23,000. the year 1 statement of changes in stockholders’ equity stated that $3,200 of dividends were paid to investors. required a. determine the before-closing balance in the retained earnings account on december 31, year 1. b. determine the after-closing balance in the retained earnings account on december 31, year 1. c. determine the before-closing balances in the revenue, expense, and dividend accounts on december 31, year 1. d. determine the after-closing balances in the revenue, expense, and dividend accounts on december 31, year 1.

(b) After-closing balance in the Retained Earnings account on December 31, Year 1,

Total Stockholder's equity = Total assets - Total liabilities

                                            =  $220,000 - $66,000

                                            = $154,000

After-closing balance of Retained Earnings = Total Stockholder's equity - Common stock

                                                                        = $154,000 - $110,000

                                                                        = $44,000

(a) Before-closing balance in the Retained Earnings account on December 31, Year 1.

Net Income = Revenue - Expenses

                   = $40,000 -  $23,000

                   = $17,000

Before-closing balance of Retained Earnings:

= After-closing balance of Retained Earnings + Dividend paid - Net Income

= $44,000 + $3,200 - $17,000

= $30,200

(c) Before-closing balances in the following accounts:

Revenue = $40,000

Expenses = $23,000

Dividend = $3,200

(d) After-closing balances in the following accounts:

Revenue = $0

Expenses = $0

Dividend = $0

Because revenue and expenses are transferred to income statement and dividend are transferred to retained earnings.

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