Question

Pullman Corporation had retained earnings of $2,100,000 at January 1, 2015. During the year the company experienced a net loss of $900,000 and declared cash dividends of $240,000. Determine the retained earnings balance at December 31, 2015.

$1,200,000

$2,760,000

$3,000,000

$960,000

Answer 1

$1,200,000

Explanation:

Statement of retained earning:

Retained Earning (January 1, 2015)	$2,100,000
Less: Net loss during the year	900,000
Retained Earning (December 31, 2015)	$1,200,000

Note :

Cash dividend are only declared not paid.

When dividend declared it shows on Balance sheet in Liability side as dividend payable and when dividends are paid it impact on balance sheet is decreased in Retained Earning.

In this case, dividends are only declared and not paid hence impact on retained earning is nothing.

Thank you :)