The income statement for August indicates net income of $100,000.The corporation also paid $25,000 in dividends during the same period.If the company is in operation for only one month and has no beginning balance in retained earnings, what is the ending balance in retained earnings?
A) $75,000
B) $100,000
C) $20,000
D) $125,000

Question

Quizplus · Accepted Answer

The ending balance in retained earnings is calculated by adding net income to the beginning balance of retained earnings and then subtracting any dividends paid. Since the company has no beginning balance in retained earnings and it earned $100,000 in net income and paid $25,000 in dividends, the ending balance in retained earnings is $100,000 - $25,000 = $75,000.

The Income Statement for August Indicates Net Income of $100,000