At September 1, 2017, Baxter Inc. Reported Retained Earnings Of $423,000. During The Month, Baxter Generated Revenues Of $60,000, Incurred Expenses Of $36,000, Purchased Equipment For $15,000 And Paid Dividends Of $6,000. What Is The Balance In Retained Earnings At September 30, 2017? | The Double-Entry System Requires That Each Transaction Must Be Recorded

At September 1, 2017, Baxter Inc. Reported Retained Earnings Of $423,000. During The Month, Baxter Generated Revenues Of $60,000, Incurred Expenses Of $36,000, Purchased Equipment For $15,000 And Paid Dividends Of $6,000. What Is The Balance In Retained Earnings At September 30, 2017? A) $423,000 debit B) $24,000 credit C) $426,000 credit D) $441,000 credit The Double-Entry System Requires That Each Transaction Must Be Recorded A) in at least two different accounts. B) in two sets of books. C) in a journal and in a ledger. D) first as a revenue and then as an expense.
1. The correct option of this multiple choice question is D as proved below:

Here We Are Given:

Retained Earnings at September 1, 2017 (Beginning Retained Earnings) = $423,000

Revenues = $60,000

Expenses = $36,000

Equipment = $36,000 (Here the value of equipment is irrelevant as it is not required in the calculation of RE at September 30, 2017)

Dividends = $6,000

We Need To Find Out:


Retained Earnings at September 30, 2017 (Ending Retained Earnings) = ?

As, we know the formula for the calculation of Ending RE that is shown below:

Retained Earnings at September 30, 2017 = Retained Earnings at September 1, 2017 + Net Income - Dividends

As, we know the Net Income’s Formula which is shown below:

Net Income = Revenues - Expenses = $60,000 - $36,000 = $24,000

By putting the values in ending retained earnings formula, we have:

RE at September 30, 2017 = $423,000 + $24,000 - $6,000 = $441,000

2. The correct option of this multiple choice question (mcq) is A, as in double entry system at least two different accounts, in which one account is debited and other one is credited in a Business Transaction, are affected. The total of debit accounts is always equal to the total of credit accounts which shows the equality of different types of accounts throughout the accounting cycle of the company’s business. So, a transaction is recorded in atleast two different types of accounts, which are affected by the business event.

The option B is wrong, as in double entry system, two or more sets of books are affected and this system is not limited to only two sets of books.

The option C is also wrong, as it affects atleast one journal and atleast one ledger and always not in one journal and a ledger. In a journal or in a ledger, atleast two different accounts are affected

The option D is also not correct, as in a business transaction, one same account (revenue) is not converted into expense account. It is not possible in a business transaction.

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