Eastern Enterprises
started the year with the following: Assets $119,000; Liabilities
$41,000; Common Stock $71,000; Retained Earnings $7,000. During the
year, the company earned revenue of $6,300, all of which was
received in cash, and incurred expenses of $3,650, all of which
were unpaid as of the end of the year. In addition, the company
paid dividends of $2,300 to owners. Assume no other activities
occurred during the year.
The amount of Eastern's retained earnings at the end of the year
is:
When the profit made during the year after distributing the dividends is added to opening balance of retained earnings, the closing balance of retained earnings is derived.
Retained earnings are those earnings which are undistributed to shareholders. The purpose of doing so is to invest it for the growth of the company. Retained earnings for the year are figures of profit after paying dividends to the investors.
Sales |
$ 6,300 |
Less: Costs |
3,650 |
Net income |
2,650 |
Less: Dividend paid |
2,300 |
Addition to retained earnings during the year |
350 |
Add: Opening balance of retained earnings |
7,000 |
Retained Earnings at the end of year |
$ 7,350 |
Hence, Eastern's retained earnings at the end of year is $ 7,350.
Get Answers For Free
Most questions answered within 1 hours.