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Jones and company had a balance in their retained earnings account at the end of 2020...

  1. Jones and company had a balance in their retained earnings account at the end of 2020 in the amount of 990,000.  They have forecasted net income in 2021 in the amount of 350,000.  They pay an estimated 40% of their net income in dividends.  What will be the addition to retained earnings at the end of 2021. What will be the ending balance in retained earnings at the end of 2021?
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Answer #1

Given about Jones and Company,

Balance in retained earnings account at 2020 end = $990000

2021 net income = $350000

Dividend paid in 2021 = 40% of net income = 40% of 350000 = $140000

So, Addition to retained earning in 2021 = Net income - dividends = 350000 - 140000 = $210000

So, ending balance in retained earnings at the end of 2021 = beginning balance + addition to retained earning

=> ending balance in retained earnings at the end of 2021 = 990000 + 210000 = $1200000

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