The following information was drawn from the accounting records of Earles Company as of December 31, 2016,

Question:

The following information was drawn from the accounting records of Earles Company as of December 31, 2016, before the temporary accounts had been closed. The Cash balance was $6,000, and Notes Payable amounted to $3,000. The company had revenues of $7,000 and expenses of $4,200. The company’s Land account had a $4,000 balance. Dividends amounted to $1,000. There was $2,000 of issued.
Required
a. Identify which accounts would be classified as permanent and which accounts would be classified as temporary.
b. Assuming that Earles’s beginning balance (as of January 1, 2016) in the Retained Earnings account was $5,200, determine its balance after the temporary accounts were closed at the end of 2016.
c. What amount of net income would Earles Company report on its 2016 income statement?
d. Explain why the amount of net income differs from the amount of the ending Retained Earnings balance.
e. What are the balances in the revenue, expense, and accounts on January 1, 2017?
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