A company has 3,000 shares of $2 par value common stock and 1,500 shares of 8%,$150 par,noncumulative preferred stock outstanding.The balance in Retained Earnings at the beginning of the year was $400,000.The net loss for the current year was $30,000.If the company paid a dividend of $1 per share on its common stock,what is the balance in Retained Earnings at the end of the year?
A)$349,000
B)$365,800
C)$451,000
D)$400,000
E)$409,000

Question

Quizplus · Accepted Answer

The correct answer is A.The company has a net loss of $30,000. This means that the Retained Earnings will decrease by $30,000. The company also paid a dividend of $1 per share on its common stock. This means that the Retained Earnings will decrease by $3,000 (3,000 shares x $1 per share). Therefore, the balance in Retained Earnings at the end of the year will be $400,000 - $30,000 - $3,000 = $367,000.

A Company Has 3,000 Shares of $2 Par Value Common