P2.7

Assume a balance of $12,220.00 for retained profit at 30 June 2019.

1. Explain what retained profits represents.
2. For the year ended 30 June 2019, the companys revenues were $10,1160.00 and its expenses (including income tax) were $98,810.00. During the year ended 30 June 2019, the company declared dividends of $1200.00. What was the balance in retained profits at the beginning of that year (1 July 2018)?
3. If the 2019 expenses were $116,000.00 instead of the figure in question 2, and the company did not declare any dividends, what would the retained profits be at 30 June 2019? How would you interpret this number?