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Sammy’s Pizza opened on January 1, 2014. Sammy’s reported the following for cash revenues and cash expenses for the years 2014 to 2016:/
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| Cash Revenues | Cash Expenses | |||||
| 2014 | $ | 15,000 | $ | 8,500 | ||
| 2015 | $ | 25,000 | $ | 11,500 | ||
| 2016 | $ | 35,000 | $ | 19,500 | ||
Expert Answer
Net Income = Cash Revenue – Cash Expenses
Retained Earnings = Opening Retained Earnings + Net Income for the Year
Hence, Net Income :
2014 : $ 15,000 – $ 8,500
= $ 6,500
2015 : $ 25,000 – $ 11,500
= $ 13,500
2016 : $ 35,000 – $ 19,500
= $ 15,500
Retained Earnings:
2014 = Opening Retained Earnings + Net Income for 2014
= $ 6500
2015 = Opening Retained Earnings + Net Income for 2015
= $ 6500 + $ 13,500
= $ 20,000
2016 = Opening Retained Earnings + Net Income for 2016
= $ 20,000 + $ 15,500
= $ 35,500
Hence, the correct answer is
| Year | Net Income | Retained Earnings |
| 2014 | 6,500 | 6,500 |
| 2015 | 13,500 | 20,000 |
| 2016 | 15,500 | 35,500 |
