Question

At the beginning of 2011, hamilton company had retained earnings of $150,000. during the year hamilton reported net income of $75,000, sold treasury stock at a “gain” of $27,000, declared a cash dividend of $45,000, and declared and issued a small stock dividend of 1,500 shares ($10 par value when the market value of the stock was $30 per share. the amount of retained earnings available for dividends at the end of 2011 was:

Answer 1

To solve for retained earnings, you have to add the net income from the beginning retained earnings then deduct dividends.

Based on the problem, these are the given:

Beginning Retained Earnings = $150,000

Net Income = $75,000

Cash Dividend = $45,000

Stock Dividend = $15,000

$150,000 + $75,000 - $60,000 = $165,000 is the retained earnings available for dividends at the end of 2011