[The Following Information Applies to the Questions Displayed Below

question 73

Multiple Choice

[The following information applies to the questions displayed below.]

Sanchez Company engaged in the following transactions during Year 1:

1) Started the business by issuing $42,000 of common stock for cash.
2) The company paid cash to purchase $26,400 of inventory.
3) The company sold inventory that cost $16,000 for $30,600 cash.
4) Operating expenses incurred and paid during the year, $14,000.

Sanchez Company engaged in the following transactions during Year 2:

1) The company paid cash to purchase $35,200 of inventory.
2) The company sold inventory that cost $32,800 for $57,000 cash.
3) Operating expenses incurred and paid during the year, $18,000.

Note: Sanchez uses the perpetual inventory system.

-What is the amount of retained earnings that will be shown on the balance sheet at December 31,Year 2?

Understand the principles behind the time period assumption.

Develop the ability to correct financial statements based on omitted adjusting entries.

Realize the importance of adjusting entries in representing true financial position and performance.

Understand the basic principles and assumptions underlying financial statements.

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Definitions:

State Action

A legal principle that actions taken by government bodies or officials are subject to constitutional standards including civil rights protections, distinguishing them from actions taken by private individuals.

Court Orders

Legal commands issued by a court or judge, requiring individuals or entities to perform or refrain from performing specific acts.

Private Agreement

An arrangement or contract made between parties without formal, public, or official announcement or documentation.

Due Process Clause

A constitutional provision guaranteeing fair treatment through the normal judicial system, especially as a citizen's entitlement.