The income statement for the year 2014 of Poole Co. contains the following information: At January 1, 2014, Poole reported Retained Earnings of $50,000. Dividends for the year totalled $10,000. At December 31, 2014, the company will report Retained Earnings of
A) $17,500.
B) $37,500.
C) $40,000.
D) $42,500.

Question

The income statement for the year 2014 of Poole Co. contains the following information:  At January 1, 2014, Poole reported Retained Earnings of $50,000. Dividends for the year totalled $10,000. At December 31, 2014, the company will report Retained Earnings of
A) $17,500. 
B) $37,500. 
C) $40,000. 
D) $42,500.

Quizplus · Accepted Answer

The Retained Earnings balance at the end of the year is calculated as follows:

Retained Earnings balance at Jan 1, 2014 = $50,000 
Add: Net Income for the year = $37,500 
Subtract: Dividends declared for the year = $10,000

Retained Earnings balance at Dec 31, 2014 = $77,500 – $10,000= $67,500.

Therefore, the correct answer is B), $37,500.

The Income Statement for the Year 2014 of Poole Co