Denmark Inc. is preparing a statement of stockholders' equity for 2016. On January 1, 2016, Denmark started the year with a $100,000 credit balance in its retained earnings account. During 2016, the company earned net income of $70,000 and declared dividends of $10,000. Also, the company received cash of $15,000 as an additional investment by its owners. What is the balance in retained earnings on December 31, 2016?
A)$100,000.
B)$170,000.
C)$175,000.
D)$160,000.

Question

Quizplus · Accepted Answer

The balance in retained earnings is calculated as the beginning balance plus net income minus dividends. So, $100,000 + $70,000 - $10,000 = $160,000. The additional investment does not affect retained earnings.