Question

Net income for the period was $245,000. The retained earnings account had a beginning balance of $25,000. If the company paid dividends of $15,000 during the year, what is the ending balance in retained earnings?

Answer 1

Answer:

The ending balance in retained earnings is $255,000

Explanation:

Ending balance in retained earnings is calculated by using following formula:

Ending balance in retained earnings = Beginning balance in retained earnings + Net income - Cash dividends - Stock dividends

The company had Net income of $245,000, beginning balance in retained earnings of $25,000 and paid dividends of $15,000.

Ending balance in retained earnings = $25,000 + $245,000 - $15,000 = $255,000