How is a firm's retained earnings at the end of the year calculated?
A) Retained earnings = Beginning balance of retained earnings minus net income in the current year plus net loss in the previous year
B) Retained earnings = Beginning balance of retained earnings plus net income in the current year plus dividends paid in the current year
C) Retained earnings = Beginning balance of retained earnings plus net income in the current year minus dividends paid in the current year
D) Retained earnings = Beginning balance of retained earnings minus net loss in the previous year minus dividends paid in the current year
E) Retained earnings = Beginning balance of retained earnings minus net income in the current year plus dividends paid in the current year

Question

Quizplus · Accepted Answer

Retained earnings at the end of the year is the beginning balance of retained earnings plus net income in the current year minus dividends paid in the current year. This formula can be represented as Retained earnings = Beginning balance of retained earnings + Net income in the current year - Dividends paid in the current year. Thus, option C is the correct answer.

How Is a Firm's Retained Earnings at the End of the Year