Reference no: EM132546120
Gemmex Inc. is a consulting company that specializes in systems design and implementation. The following transactions are recorded by Gemmex during July, its first month of operations.
July 1: Issued common shares in exchange for $50,000 in cash.
July 1: Paid $2,400 representing the rent for the months of July, August, and September.
July 1: Signed a three-year note for $50,000 at the bank. The note bears an annual interest rate of 12%, and both the note and its accrued interest are due at the end of three years.
July 1: Purchased a packaged set of computer systems for $18,000 to be used in future consulting jobs. The package has a useful life of three years and no residual value.
July 15: Received $8,000 cash from a customer for services to be performed over the next two months.
July 20: Paid employees $7,500 for the first half of July. A payment of the same amount but for the second half will be made on August 5.
July 31: Billed customers $17,500 for the work performed during July.
July 31: Received a utility bill for $300. The amount is due in 30 days.
Gemmex follows an accrual accounting system. It has an effective rate of 40% for income tax which is accrued monthly but paid annually at the end of the year.
Question 1: what would retained earnings be?