Henson Company began the year with retained earnings of $380,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year?
A)$540,000
B)$460,000
C)$840,000
D)$500,000

Question

Quizplus · Accepted Answer

Retained earnings at the end of the year can be calculated by adding net income (revenue - expenses) to the beginning balance of retained earnings and then subtracting any dividends paid. 
Net income = $500,000 - $380,000 = $120,000
Retained earnings at the end of the year = $380,000 + $120,000 - $40,000 = $460,000. Therefore, the best choice is B.

Henson Company Began the Year with Retained Earnings of $380,000