Sammy’s Pizza opened on January 1, Year 1. Sammy’s reported the following for cash revenues and cash expenses for the Years 1 to 3:

Required

a. What would Sammy’s Pizza report for net income and retained earnings for the Years 1, 2, and 3?

b. Explain the difference between net income and retained earnings.

c. Assume that Sammy’s Pizza paid a $5,000 dividend to stockholders in Year 2. What would Sammy’s Pizza report for net income and retained earnings for Year 2 and Year 3?

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Cash Revenues Cash Expenses $20,000 $30,000 $40,000 $11,000 $14,000 $22,000 Year 1 Year 2 Year 3