To compute the ending balance of retained earnings:
A)the beginning balance in retained earnings will be negative for a new business.
B)net loss for the period is subtracted from the beginning balance of retained earnings.
C)dividends are added to the beginning balance of retained earnings.
D)common stock sold during the period is added to the beginning balance of retained earnings.

Question

Quizplus · Accepted Answer

Net loss for the period is subtracted from the beginning balance of retained earnings to compute the ending balance. Dividends are also subtracted, not added, and common stock sales affect paid-in capital, not retained earnings. The beginning balance for a new business would be zero, not negative.

To Compute the Ending Balance of Retained Earnings