burger barn, inc. began operations two years ago. results from its first two years of operations are…

burger barn, inc. began operations two years ago. results from its first two years of operations are provided below.\n\naccount balance at end of year 1 balance at end of year 2\naccounts payable $23,000 $17,000\nbuilding $29,000 $42,000\ncash $150,000 $150,000\ncommon stock $80,000 $80,000\ndividends $0 $20,000\ninventory $12,000 $9,000\nland $60,000 $60,000\nlong - term notes payable $124,000 $104,000\noperating expense $203,000 $226,000\nrevenues $224,000 $281,000\nsalaries payable $3,000 $4,000\n\nwhat was burger barn, inc.s retained earnings balance at the beginning of year 1, when the business was first formed?\n\na. $0\nb. $101,000\nc. $21,000\nd. not enough information is provided.

burger barn, inc. began operations two years ago. results from its first two years of operations are provided below.\n\naccount balance at end of year 1 balance at end of year 2\naccounts payable $23,000 $17,000\nbuilding $29,000 $42,000\ncash $150,000 $150,000\ncommon stock $80,000 $80,000\ndividends $0 $20,000\ninventory $12,000 $9,000\nland $60,000 $60,000\nlong - term notes payable $124,000 $104,000\noperating expense $203,000 $226,000\nrevenues $224,000 $281,000\nsalaries payable $3,000 $4,000\n\nwhat was burger barn, inc.s retained earnings balance at the beginning of year 1, when the business was first formed?\n\na. $0\nb. $101,000\nc. $21,000\nd. not enough information is provided.

Answer

Explanation:

Step1: Recall accounting equation

Assets = Liabilities + Equity. Equity = Common Stock + Retained Earnings. At the start of Year 1 (beginning of business), assume no prior - period data. We know that at the start of a new business, if no transactions have occurred yet, Retained Earnings is $0$ because there are no earnings to retain. Also, we can calculate assets and liabilities at the end of Year 1 and use the accounting equation to double - check. But the simplest way is to note that for a newly formed business, the beginning Retained Earnings balance is $0$.

Answer:

A. $0$