Ferraro Consulting provides risk management services to individuals and to corporate clients. The company closes its temporary accounts once each year on December 31. The company recently issued the following income statement as part of its annual report:

                

FERRARO CONSULTING INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2011
Revenue:
Consulting revenue—individual clients		$ 40,000
Consulting revenue—corporate clients		160,000
		$200,000
Expenses:
Advertising expense	$ 16,000
Depreciation expense: computers	24,000
Rent expense	9,600
Office supplies expense	4,400
Travel expense	57,800
Utilities expense	3,300
Telephone and Internet expense	1,900
Salaries expense	155,500
Interest expense	2,500	275,000
Net loss		$ (75,000)

The firm’s statement of retained earnings indicates that a $25,000 cash dividend was declared and paid in 2011.

a.Prepare the necessary closing entries on December 31, 2011.

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b. If the firm’s Retained Earnings account had a $300,000 balance on January 1, 2011, at what amount should Retained Earnings be reported in the firm’s balance sheet dated December 31, 2011?