Sanchez Company engaged in the following transactions during Year 1:

1. 1) Started the business by issuing $13,300 of common stock for cash.
2. 2) The company paid cash to purchase $8,000 of inventory.
3. 3) The company sold inventory that cost $5,400 for $11,150 cash.
4. 4) Operating expenses incurred and paid during the year, $4,900.

Sanchez Company engaged in the following transactions during Year 2:

1. 1) The company paid cash to purchase $11,600 of inventory.
2. 2) The company sold inventory that cost $9,600 for $17,750 cash.
3. 3) Operating expenses incurred and paid during the year, $5,900.

Note: Sanchez uses the perpetual inventory system.

The amount of retained earnings at December 31, Year 2 is:

Multiple Choice

• $2,250.
• $13,400.
• $7,900.
• $3,100.