Retained earnings and cash. Cookies \& Pastries Inc. started business on July 1, 2010 , with \(\$ 16,000\) cash contribution from its owners in exchange for common stock. The company used \(\$ 7,500\) of the cash for equipment for the new shop and \(\$ 3,500\) for cookies and pastries for its inventory. During the month, the company earned \(\$ 7,000\) cash revenue from the sale of the entire inventory. On July 31 , the owners spent \(\$ 5,000\) for more cookies and pastries for the inventory. What is the retained earnings balance on July 31? How much cash does the company have on hand on July 31? Explain what retained earnings are and why this amount is not cash. Use the accounting equation to help answer the questions. (LO 4)