Alright, let’s go through and explain the solution step-by-step.
### Step 1: Calculating Pecos's Retained Earnings at the End of 2024
1. Pecos's Initial Retained Earnings (January 1, 2024):
- Pecos had an initial retained earnings balance (credit) of \[tex]$(930,000).
2. Adding Suaro's 2023 Earnings:
- Suaro earned \$[/tex](75,000) during the year 2023 and paid no dividends.
- Therefore, this amount will directly contribute to Pecos's retained earnings.
3. Retained Earnings Calculation:
- Pecos's retained earnings at the end of 2024 will be calculated as follows:
[tex]\[
\text{Pecos's Retained Earnings End 2024} = \text{Initial Retained Earnings} + \text{Suaro's 2023 Earnings}
\][/tex]
Plugging in the numbers:
[tex]\[
\text{Pecos's Retained Earnings End 2024} = -930,000 + 75,000 = -855,000
\][/tex]
- Therefore, Pecos's retained earnings at the end of 2024 is [tex]\(-855,000\)[/tex].
### Step 2: Calculating Total Operating Expenses
1. Pecos's Operating Expenses:
- Pecos's operating expenses for the year 2024 are \[tex]$(821,000).
2. Suaro's Operating Expenses:
- Suaro's operating expenses for the year 2024 are \$[/tex](262,000).
3. Total Operating Expenses Calculation:
- Total operating expenses for the combined entity are the sum of both Pecos's and Suaro's operating expenses:
[tex]\[
\text{Total Operating Expenses} = \text{Pecos's Operating Expenses} + \text{Suaro's Operating Expenses}
\][/tex]
Plugging in the numbers:
[tex]\[
\text{Total Operating Expenses} = 821,000 + 262,000 = 1,083,000
\][/tex]
- Therefore, the total operating expenses are \[tex]$(1,083,000).
### Step 3: Calculating Consolidated Net Income
1. Pecos's Revenues:
- Pecos's revenues for the year 2024 are \$[/tex](8,427,000).
2. Total Operating Expenses:
- We already calculated the total operating expenses as \[tex]$(1,083,000).
3. Consolidated Net Income Calculation:
- The consolidated net income is calculated by subtracting the total operating expenses from the revenues:
\[
\text{Consolidated Net Income} = \text{Pecos's Revenues} - \text{Total Operating Expenses}
\]
Plugging in the numbers:
\[
\text{Consolidated Net Income} = 8,427,000 - 1,083,000 = 7,344,000
\]
- Therefore, the consolidated net income is \$[/tex](7,344,000).
### Summary:
- Pecos's retained earnings at the end of 2024: [tex]\(-855,000\)[/tex]
- Total operating expenses: \[tex]$(1,083,000\)
- Consolidated net income: \$[/tex](7,344,000\)
