assume the balance in the retained earnings account at january 1, 2025 is $17,000, and $5,000 dividends are…

assume the balance in the retained earnings account at january 1, 2025 is $17,000, and $5,000 dividends are declared and paid in 2025. if a credit balance of $15,000 exists in retained earnings after closing out revenues and expenses at the end of 2025, this indicates:\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 $3,000.\nd. the company had a net loss of $3,000.

assume the balance in the retained earnings account at january 1, 2025 is $17,000, and $5,000 dividends are declared and paid in 2025. if a credit balance of $15,000 exists in retained earnings after closing out revenues and expenses at the end of 2025, this indicates:\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 $3,000.\nd. the company had a net loss of $3,000.

Answer

Explanation:

Step1: Recall the formula for ending retained earnings

The formula for ending retained earnings is (Ending\ Retained\ Earnings=Beginning\ Retained\ Earnings + Net\ Income - Dividends) (if there is a net loss, it is (Ending\ Retained\ Earnings=Beginning\ Retained\ Earnings- Net\ Loss - Dividends)). Let (x) be the net income (or net loss). We know that (Beginning\ Retained\ Earnings = 17000), (Dividends=5000), and (Ending\ Retained\ Earnings = 15000).

Step2: Substitute the values into the formula

Substituting the values into the formula (15000=17000 + x-5000).

Step3: Solve for (x)

First, simplify the right - hand side of the equation: (17000-5000 + x=12000 + x). Then, we have the equation (15000=12000 + x). Subtract 12000 from both sides: (x=15000 - 12000). So (x = 3000). Since (x) is positive, it is a net loss (because the ending retained earnings is less than the beginning retained earnings after considering dividends).

Answer:

D. the company had a net loss of $3,000.