Denmark Inc. is preparing a statement of stockholders' equity for 2014. On January 1, 2014, Denmark started the year with a $100,000 credit balance in its retained earnings account. During 2014, the company earned net income of $70,000 and declared dividends of $10,000. Also, the company received cash of $15,000 as an additional investment by its owners. What is the balance in retained earnings on December 31, 2014?
A) $100,000.
B) $170,000.
C)$175,000.
D)$160,000.

Question

Quizplus · Accepted Answer

The balance in retained earnings on December 31, 2014, is calculated by taking the beginning balance of $100,000, adding the net income of $70,000, and subtracting the dividends of $10,000, resulting in $160,000. The additional investment by owners does not affect retained earnings.