assume the balance in the retained earnings account at january 1, 2025 is $11,000, and $2,000 dividends are…

assume the balance in the retained earnings account at january 1, 2025 is $11,000, and $2,000 dividends are declared and paid in 2025. if a credit balance of $18,000 exists in retained earnings after closing out revenues and expenses at the end of 2025, this indicates\n\na. the company had net income of $20,000.\nb. the company had a net loss of $20,000.\nc. the company had net income of $9,000.\nd. the company had a net loss of $9,000.

assume the balance in the retained earnings account at january 1, 2025 is $11,000, and $2,000 dividends are declared and paid in 2025. if a credit balance of $18,000 exists in retained earnings after closing out revenues and expenses at the end of 2025, this indicates\n\na. the company had net income of $20,000.\nb. the company had a net loss of $20,000.\nc. the company had net income of $9,000.\nd. the company had a net loss of $9,000.

Answer

Explanation:

Step1: Recall the retained earnings formula

The formula for ending retained earnings is: (Ending\ Retained\ Earnings=Beginning\ Retained\ Earnings + Net\ Income - Dividends) (if (Net\ Income>0)) or (Ending\ Retained\ Earnings=Beginning\ Retained\ Earnings- Net\ Loss - Dividends) (if (Net\ Loss > 0)). Let (NI) (or (NL)) represent net income (or net loss). We know that (Beginning\ Retained\ Earnings = 11000), (Dividends=2000), and (Ending\ Retained\ Earnings = 18000).

Step2: Substitute values into the formula

Substitute the values into the formula (18000=11000 + NI-2000).

Step3: Solve for (NI)

Rearrange the formula to solve for (NI): (NI=18000 - 11000+2000). [NI = 9000]

Answer:

C. the company had net income of $9,000.