The beginning balance in the Common Stock account of a company was $10,000. The revenues and expenses were $200,000 and $140,000, respectively. During the year, the company declared and paid dividends of $5,000. The ending balance in the Retained Earnings was $55,000. (Assume that the beginning balance of Retained Earnings was zero.)

Question

Quizplus · Accepted Answer

The net income for the year can be calculated as $200,000 - $140,000 = $60,000. Dividends of $5,000 were paid, so the total amount added to Retained Earnings is $60,000 - $5,000 = $55,000. The beginning balance in Common Stock is not relevant to the calculation of Retained Earnings. Therefore, the statement is true.

The Beginning Balance in the Common Stock Account of a Company