Sanchez Company engaged in the following transactions during 2015:

1)	Started the business by issuing $11,900 of common stock for cash.
2)	The company paid cash to purchase $7,300 of inventory.
3)	The company sold inventory that cost $4,700 for $9,400 cash.
4)	Operating expenses incurred and paid during the year, $4,200.

Sanchez Company engaged in the following transactions during 2016:
1)	The company paid cash to purchase $10,200 of inventory.
2)	The company sold inventory that cost $8,900 for $16,000 cash.
3)	Operating expenses incurred and paid during the year, $5,200.

Note: Sanchez uses the perpetual inventory system.

The amount of retained earnings at December 31, 2016 is:

$1,900.

$2,400.

$7,200.

$11,300.

Please leave an explanation.