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Presented in the line graphs below are trends in revenues and expenses for each of three companies over their first six years of operations. The
Presented in the line graphs below are trends in revenues and expenses for each of three companies over their first six years of operations. The balance of the Retained Earnings account at the end of each year is presented by the bars. Each company has the same amount of revenues in Year 1 and the same amount of expenses in Year 1. Assume no dividends were paid by any of the companies.
Company A Revenues, Expenses, and Retained Earnings Company C Revenues, Expenses, and Retained Earnings $32,000,000 $20,000,000 $8,000,000 ($4,000,000) Retained Earnings Revenues Expenses Company B Revenues, Expenses, and Retained Earnings Required:
1. For Company A, revenues over the six years are: | |
2. For Company C, expenses in Year 5 are: | |
3. For Company A, the difference between revenues and expenses is the same in each of the six years. Therefore, the companys balance of Retained Earnings over the six years: | |
4. Company B has the same amount of expenses as Company A in each year, but revenues are growing at a faster pace. Therefore, by the end of Year 6, Company Bs balance of Retained Earnings will be: | |
5a. Company C has the same amount of revenues as Company A in each year, but expenses are growing at a faster pace. Therefore, by the end of Year 6, Company Cs balance of Retained Earnings will be: | |
5b. In a year that Company C reports expenses greater than revenues, the balance of Retained Earnings: | |
5c. By the end of Year 6, Company Cs balance of Retained Earnings is: | |
6. If any of these companies had paid dividends in any year, their balances of Retained Earnings by the end of year 6 would have been: |
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